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An Assessment
of the City’s ICT
Infrastructure
Executive Summary
June 2009
SAMI Consulting
An Assessment
of the City’s ICT
Infrastructure
Executive Summary
SAMI Consulting
2b Northbrook Court
Park Street
Newbury, RG14 1EA
United Kingdom
www.samiconsulting.co.uk
Cover image Todd Cliff, TNC Photography
June 2009
An Assessment of the City’s ICT Infrastructure is published by the City of London.
The authors of this report are SAMI consulting.
This report is intended as a basis for discussion only. Whilst every effort has been
made to ensure the accuracy and completeness of the material in this report,
the authors, SAMI Consulting, and the City of London, give no warranty in that
regard and accept no liability for any loss or damage incurred through the use
of, or reliance upon, this report or the information contained herein.
June 2009
© City of London
PO Box 270, Guildhall
London
EC2P 2EJ
www.cityoflondon.gov.uk/economicresearch
Table of Contents
Foreword ................................................................................................................... 1
Executive Summary................................................................................................. 3
Chapter 1: Introduction ......................................................................................... 5
Summary ............................................................................................................... 5
Background .......................................................................................................... 5
The City and Financial Services ........................................................................ 5
The role of ICT in Financial Services.................................................................. 6
Measuring ICT and competitiveness................................................................ 8
The current ICT infrastructure in the City ......................................................... 8
Challenges in the medium term ..................................................................... 10
Regulation........................................................................................................... 11
Looking further ahead ...................................................................................... 12
Methodology...................................................................................................... 12
Chapter 2: ICT Infrastructure and Competitiveness ....................................... 15
Summary ............................................................................................................. 15
Introduction ........................................................................................................ 15
Country–wide ICT infrastructure indices ........................................................ 15
The Role of Governments................................................................................. 19
Examples of Good Practice......................................................................... 21
City specific indices .......................................................................................... 22
What is the bottom line? .................................................................................. 23
Recommendation ............................................................................................. 24
Chapter 3: The City’s Current ICT Infrastructure .............................................. 25
Summary ............................................................................................................. 25
ICT Infrastructure and recent changes ......................................................... 25
Case study – Reducing the need for data centre real estate ............. 28
ICT Infrastructure for the City’s Financial Services ....................................... 28
The City’s ICT installed infrastructure.............................................................. 30
Data Centres – definitions and usage ....................................................... 31
Broadband and legacy services.................................................................... 34
High specification networks............................................................................. 36
Mobile and wireless services............................................................................ 38
WiFi and WiMax .............................................................................................. 38
Data Centres ...................................................................................................... 39
Power Supplies ................................................................................................... 41
Security and Resilience..................................................................................... 42
Case study – Disaster simulation to keep prepared................................ 44
Skills in the ICT supply industry.......................................................................... 47
SWOT Analysis: Summary of Results ................................................................ 48
Recommendations............................................................................................ 49
Chapter 4: The Medium Term Outlook for the City’s ICT Infrastructure....... 50
Summary ............................................................................................................. 50
Planning in the organisations surveyed......................................................... 50
Broadband and legacy services.................................................................... 51
High specification networks............................................................................. 51
Mobile phones and wireless services ............................................................. 52
Flexible and home working: the Green impact .......................................... 53
Case Study – BT’s experience of home working...................................... 54
Data Centres ...................................................................................................... 55
The Wigley Report.......................................................................................... 55
Power supply ...................................................................................................... 57
The Role of Green ICT in data centre policy................................................ 58
Case study - Lack of energy supply threatens City expansion............. 60
Case study - Moving to greener pastures ................................................. 62
Security and Resilience..................................................................................... 63
SMEs: similarities and differences to large organisations. .......................... 64
Recommendations............................................................................................ 65
Chapter 5: Regulation.......................................................................................... 66
Summary ............................................................................................................. 66
Financial and Business Regulation.................................................................. 66
International, EU and UK telecoms regulation ............................................. 68
Broadband and legacy services.................................................................... 70
Business Connectivity and High Specification Networks............................ 70
Mobile and wireless services............................................................................ 71
Implications for the UK and the City of London........................................... 74
Views of ICT infrastructure regulation ............................................................ 75
SWOT relating to regulation............................................................................. 76
Recommendations............................................................................................ 76
Chapter 6: The Longer Term View and Conclusions ...................................... 79
Summary ............................................................................................................. 79
The Financial Services Industry in the medium to long term ..................... 79
The implications for the City’s ICT infrastructure .......................................... 80
Implications for Skills .......................................................................................... 81
Conclusions and recommendations ............................................................. 83
Appendix 1: List of Interviewees ........................................................................ 87
Appendix 2: Questions Asked ............................................................................. 89
Current Position .................................................................................................. 89
Medium to Long Term....................................................................................... 89
Regulation........................................................................................................... 91
Appendix 3: Data Sources................................................................................... 92
Countries: Background..................................................................................... 92
Cities: Background ............................................................................................ 92
The City in the Global Economy ..................................................................... 93
London Fringe..................................................................................................... 94
Data Centres and Power Supplies ................................................................. 94
Regulation........................................................................................................... 94
Resilience ............................................................................................................ 95
Green IT ............................................................................................................... 96
Website ................................................................................................................ 96
General................................................................................................................ 96
Appendix 4: Glossary ............................................................................................ 98
Appendix 5: ICT Indices...................................................................................... 103
Introduction ...................................................................................................... 103
World Bank KAM Indexes ............................................................................... 104
WEF / Insead Networked Readiness Index ................................................. 104
EIU E-readiness rankings.................................................................................. 105
GFCI 4 and GFCI 5........................................................................................... 106
MasterCard Worldwide Centers of Commerce (WCOC) Index ............ 106
Sources .............................................................................................................. 107
Appendix 6: Worldwide Network Operators .................................................. 109
Appendix 7: the Singapore iN2015 Plan.......................................................... 111
Appendix 8: Scenarios for digital communications ...................................... 113
Stuart Fraser
City of London
The focus of this report undertaken for us by SAMI Consulting is on the information
and communication technology (ICT) infrastructure of the central financial area
of London. The research is concerned with the relative efficiency of ICT support
for market operations in London and their present and future role in ensuring we
retain the excellent operational links to the rest of the world that give London its
leading role as a global financial hub.
This study is based on interviews with 62 City stakeholders during November and
December 2008 and associated analysis and provides an update on the
research published as “The City of London ICT Infrastructure Review”
commissioned in 2001. Since this time there have been many important changes
in the ICT industry and this report provides insight into the attractiveness to
business of the City of London and its fringes, in terms of existing ICT infrastructure
and future challenges. It assesses how current and future ICT regulation is likely
to affect the attractiveness of the City as a base for the financial services sector.
Overall the report supports a favourable view of the ICT provision in the Square
Mile in that most respondents believed that the ICT infrastructure in the City was
“as good as anywhere in the world”, and above the necessary threshold to
maintain the attractiveness of the City to the financial services sector in
comparison with other global financial centres. The City was found to have
sufficient depth of network connectivity and enough data centre providers to
1
offer network resilience and security to businesses in the City and to
accommodate future demand.
The study observes that while larger organisations are in a position to benefit from
ICT services offered by a multitude of network infrastructure providers, SMEs often
use standard retail ICT services. An important finding is that SMEs could therefore
benefit from the delivery of enhanced services and Service Level Agreements
which would include ICT planning and installation of ICT Infrastructure to serviced
offices.
Respondents commented that while the current regulatory framework for ICT
infrastructure was seen as adequate, there was additional scope for the City of
London to encourage Ofgem to take a clearer view on harmonisation of fixed
line standards across Europe. It is important for example that spectrum
allocation does not interfere with emergency networks, and standardisation of
terms in Service Level Agreements.
In regulating the companies which run the electricity networks in the City, future
ICT provision must be considered in the light of how it will serve the effective
operation of the City as a global financial centre. It is important that we actively
monitor and address the issues raised by users across the City. We face a period
of enormous structural change in world economic power and global trading
patterns. ICT provision must continue to serve and address the challenges of
London’s central place in the communication links to other financial centres.
Stuart Fraser
London
June 2009
2
Executive Summary
The City of London Corporation has commissioned this new study into existing ICT
infrastructure and the future ICT requirements of businesses in the City and its
immediate Fringes, eight years after the first such study1. This report is
complementary to the City’s earlier report 2 on financial markets, which identified
that “electronic trading has had an important impact on all the main markets
covered”; and to the Review of the Competitiveness of London’s Financial
Markets commissioned by the Mayor of London3, the Wigley Report, and the
Bischoff report on Britain's financial services competitiveness.
Both large organisations and SMEs concur that London’s current ICT infrastructure
is “as good as anywhere in the world”. In addition to aspects of ICT infrastructure
contributing to competitiveness through its role in quality of life, the competitive
ICT infrastructure for the future of financial services will include five key aspects:
• Network connectivity;
• Data centre capability;
• Electrical power supplies;
• Security and resilience; and
• Skills.
Network connectivity is felt to be adequate for the next decade, even allowing
for doubling of demand every year. Mobile technologies will start to deliver
reliable broadband services, and be increasingly used for “the last mile”.
London is well served by worldwide network operators, and has numerous
suppliers of high specification fibre connectivity.
In terms of data centre capacity, the demand for data centre space will
continue to increase. The EC estimates that power demand from data centres
will nearly double from 2007 to 2020. New technology will increase power
requirements per square metre, which together with Green ICT policies, mean
that many existing City data centres will require replacing.
This means that additional electrical power supplies will be needed. This is seen
as a major problem for the City. A number of our respondents were planning
1 “The City of London ICT (Information, Communications and Technology) Infrastructure Review”
2001
2 “The Competitive Impact of London’s Financial Market Structure”, City of London, April 2007
3 Review on the Competitiveness of London’s Financial Centre, January 2009.
3
data centres outside London, but this is not feasible for many core City trading
applications.
The security and resilience of the City’s ICT infrastructure is important for many
companies. This includes guarding against the threat of electronic attack.
Security concerns are leading many organisations to locate data centres
physically separately, as well as employing firewalls. The need for a highly secure
and resilient mobile network for use in an emergency is flagged.
The skills needed to support the ICT infrastructure are currently a strength of the
City, but skills in the supply industry are expected to be subject to increased
competition for engineers and other qualified professionals from other financial
services centres, other industries, and the changing dynamics of the ICT industry.
SMEs in the City and fringes are very diverse, but one common theme was the
multiple roles of staff. Guidance from the City of London Corporation on aspects
of managing the ICT infrastructure could help.
The key recommendations from the study are that the Corporation should:
• Co-ordinate a 10- year ICT Infrastructure Plan covering the five aspects of
ICT critical to financial services, namely, worldwide network connectivity, fibre
“in the ground”, mobile broadband, data centres, electrical power supplies,
security and resilience, and skills, “within the M25”. This would provide a vehicle
for a structured dialogue with the Greater London Authority (GLA), London
Boroughs, the electrical power supplier EDF Energy Networks and e-skills UK;
• Spearhead a discussion with the government and regulators on the
perception that power availability and cost are a constraint on the
competitiveness of the City;
• Develop a package of supporting programmes for SMEs, covering
business and ICT planning, Service Level Agreements (SLA), data security and
choosing serviced offices;
• Consider sponsoring or commissioning a commercially available secure
and resilient mobile network, especially focused on availability during
sustained emergencies;
• Open discussions with Ofcom on telecommunications supplier
serviceability level agreements standards, wireless spectrum allocation, and
the implications of converging network technologies;
• Within the context of a 10- year ICT Infrastructure Plan, consider the future
ICT skills needs of the financial services sector, within the wider context of the
changing shape of the financial services industry, to anticipate potential future
developments.
4
Chapter 1: Introduction
Summary
This chapter considers the role of ICT (Information, Communications and
Technology) Infrastructure in the context of the City, and explains the relevance
of the study to the future competitiveness of the City. It identifies the main ICT
infrastructure factors affecting competitiveness of financial services, lays out the
structure to be used for later chapters, and briefly describes the methodology
used.
Background
Since “The City of London ICT Infrastructure Review” was published in 2001, there
have been many changes in the IT & Telecoms industry and in the global
environment. The City of London Corporation (CoLC) has commissioned this new
study into existing ICT infrastructure and the future ICT requirements of businesses
in the Square Mile and the City fringes to inform its own actions and policies, and
that of stakeholders and other interested parties.
London as a global city has at least four main strengths: as a global financial
services centre, as an attractive place to live for those with money at their
disposal, as a centre of the media, arts and leisure industries, and as a global
centre for education, with world famous universities and a host of supporting
facilities.
4 “The Competitive Impact of London’s Financial Market Structure”, City of London, April 2007
5
services except in so far as they create demand for data centres and high
specification connectivity.
The City fringes comprise the Boroughs of Hackney, Tower Hamlets, Camden,
Southwark, Lambeth, Westminster and Islington. This report focuses on the ICT
infrastructure as it supports the Square Mile and City fringes.
The whole financial services industry, globally, assumes that a robust data and
voice communications infrastructure will be available between industry members
and also to connect to their customers: new products are designed increasingly
on this basis. ICT has now become completely pervasive in all aspects of
financial services, both in the business to consumer (B2C) market and in the
business to business (B2B) market.
Electronic trading has been an important part of the City’s development of the
raft of new B2B systems for electronic trading which have come to the fore in
recent years. These B2B systems require high specification connectivity, where
the high specification refers to speed, quality and availability of services.
6
The core question that we addressed was: What should the CoLC do to ensure
continued effective ICT infrastructure support for Financial Services in the Square
Mile and City fringes?
7
Measuring ICT and competitiveness
At a city rather than country level, there are two sets of indices comparing
global financial centres: the Global Financial Centres Index (GFCI), published by
the CoLC, and the Mastercard Worldwide Centres of Commerce (WCOC) index.
Both consider a very wide range of factors and – tangentially – ICT infrastructure.
Both rank London first and New York second, with Hong Kong and Singapore in
the next group. These rankings suggest that the ICT infrastructure in the City and
fringes is above a threshold level needed to maintain overall competitiveness.
We find additionally that the measures taken by the UK government and the
CoLC represent best practice as identified by the Economist Intelligence Unit.
We recommend that the CoLC further follow best practice and develop a 10-
year plan for ICT in support of financial services in London.
So dependent are financial services on ICT that no city can any longer expect to
host a Financial Services industry presence without a reliable, high performance
ICT infrastructure. The ICT infrastructure in this context covers more than just the
wires, for instance all five dimensions identified above.
8
In Chapter 3 we consider the current state of the City’s ICT infrastructure, under
these headings, for large organisations and for SMEs, as this relates to broadband
and legacy networks, high specification (fibre)5 networks, mobiles and wireless
networks, data centres, security and resilience, power supplies, and skills in the
ICT supplier industry.
The City has a large number of worldwide network operators, and there is more
data centre space in London than in European competitor cities. Both of these
reflect what seems to be a very competitive market, with multiple suppliers, and
indeed find that competitive price and availability of ICT infrastructure is taken
for granted by large and SME organisations. We recommend that the CoLC
should monitor these as measures of competitiveness, within a 10- year ICT plan.
The research shows that the City at present is well placed in all respects of ICT
infrastructure provision. But ICT no longer presents a positive competitive
advantage because it is becoming ubiquitous. A robust ICT infrastructure is no
longer a motivator for financial services to set up shop, it is a hygiene factor6.
However deficiencies in the ICT infrastructure and/or supply chain will
undoubtedly have a negative effect.
5 Optical fibre, used e.g. for high connectivity between data centres or where fast response is
required. Modern-day optical fibers can carry information at around 14 Terabits per second over
160 kilometres of fiber
6 Frederick Herzberg “One More Time: How Do You Motivate Employees?” , Harvard Business
9
• Continuity of power supplies;
• Nature and serviceability of business continuity planning; and
• The impact on the availability of services of shared networks and common
duct works etc.
The need to build resilience into supply, through peering and other forms of co-
operation, leads to a recommendation that the CoLC should encourage Ofcom
to take a clearer lead on serviceability standards.
In the medium term, there are challenges to the City from newer Global
Financial Services Centres who are able to plan “from the fibre up”. The City also
faces challenges from new electronic trading platforms, from electronic attack,
power supplies for data centres, and in maintaining skills in the ICT supply
industry.
Data centre power requirements across Europe are expected to nearly double
between 2007 and 2020, according to the EC. The constraints on additional
power in London were highlighted by the study. We recommend two ways to
tackle this. First, the generic UK-wide problems of cost and availability of power
need to be tackled by discussions with the regulator and government. Second,
the production of the ICT plan identified would provide a vehicle for reaching a
shared understanding between the responsible bodies and the major users of ICT
infrastructure on the capabilities which could be delivered, with a scope of
“within the M25”.
10
second is that the CoLC should consider the role of a highly secure mobile
commercial network in security and resilience, especially in an extended
emergency, within the context of a 10- year ICT Plan.
Regulation
The existing and future role of regulation was discussed with suppliers,
government, regulators, and businesses. We also were able to take advantage
of the specialist regulatory expertise of Netstrategics Ltd. These issues are
covered in Chapter 5.
The EU has taken a strong role in regulation of financial services, which may
affect the operations of a number of UK-based platforms and their associated
infrastructure – with a two hour recovery rather than a 24 hour recovery being
the required standard. Overall, recent events in the financial services markets
are expected to result in increased regulatory and supervisory activity.
The UK regulator, Ofcom, is due to publish in June 2009 a report by Lord Carter7
on “Digital Britain” which is widely expected to suggest that the spectrum
currently set aside for digital television could be used for fourth generation
mobile technology. The interim report is available now8. This would support
wireless downloads at five times the speed of fixed line broadband.
11
Looking further ahead
Financial services will be subject to a number of forces over the next decade.
The role of the regulator, competition from new directions, and the ongoing
development of new ways of electronic trading, are leading to a complex
picture of change, discussed in Chapter 6. The end points are not yet clear, but
we recommend that the City should continue to commission research to clarify
perspectives on the financial services sector’s future.
In the ICT industry, there are also questions on the future shape of the industry,
and its effect on the competitiveness of the City. The current credit crisis will
have an effect on investment, as will the trend towards end-to-end connections,
using a range of fixed line and wireless technologies. While it seems probable
that technology will be available, its use requires skilled manpower. The study
picked up a few warning signs of skills shortages, and we recommend that the
City should facilitate research on the future ICT skills needs of the financial
services sector and related business activities in the City.
Methodology
The approach chosen for this study combined primary research in the form of
interviews, and secondary research in areas where there was an existing
literature. SAMI’s Natural Agenda framework was used for analysis to ensure that
we could capture both the detail and the consensus from our interviews.
Chapters 3 and 4 are primarily based on interviews, with supporting desk
research. A framework for the interview questions was established via meetings
with key advisors from academia, the Challenge Forum and the Financial
Services Club.
Interviews
There was a common approach to the interviews:
• Interviews were conducted by phone (using where necessary our
conferencing facility BT MeetMe) or in person, depending on availability
of the interviewee;
• Interviews were held under the Chatham House Rule, so that quotations
could be used but not attributed to an individual;
• Interviewees would be asked questions appropriate to their position and
organisation, drawn from a standard set of questions (Appendix 2);
• Interviews were recorded under a set of standard headings, and stored
on our project Basecamp™ web site. This facilitated the extraction of
common themes and key points for the report.
12
The list of participating organisations is included as Appendix 1 and the set of
questions used as Appendix 2. The questions could be broadly grouped under
two headings:
• Are ICT services adequate for your needs (for example, response time,
time to install, etc)?
• Are ICT services resilient against potential failures in power, interruptions of
service through failure of common components, etc? How well tested are
back up routes?
Interviewees
We divided the people / organisations to be interviewed into six main categories:
• Banks, brokers and insurance companies, financial services organisations;
• Service providers, of services focused around financial services;
• Infrastructure providers (“telcos”);
• SMEs in the City and fringes;
• Local Government, including the City of London Corporation; and
• Regulators.
There is no single source which compares the ICT Infrastructure in global financial
centres. As a leading research publisher told us, this was the sort of research that
was talked about but not done. We therefore began by considering the
country-wide comparisons of ICT Infrastructure.
We also studied the published data on Singapore, Dubai, Hong Kong and New
York, in relation to ICT infrastructure, and the two comparative indices which look
at the overall competitiveness of cities.
13
Chapter 5, on regulation, contains an analysis of published sources plus a review
of the attitude of the interviewees to regulation. Chapter 6 is based on
published sources on the future of the financial services industry, and discussions
with experts on the future of the ICT industry.
14
Chapter 2: ICT Infrastructure and Competitiveness
Summary
This Chapter uses comparators for the City to suggest initiatives that the CoLC
could take to promote competitiveness. We start by comparing the country-
wide indices relating to ICT infrastructure, to bring out best practice guidelines for
government. This leads us to study Singapore, Dubai and New York in more
detail. We then bring out the role of ICT infrastructure in a wider assessment of
global financial centres. We conclude that the ICT infrastructure in London is
currently above a critical threshold, but that the CoLC could focus on factors
critical to financial services to ensure competitiveness over the next decade, in
the context of a 10- year ICT Infrastructure Plan
Introduction
9 http://info.worldbank.org/etools/kam2
10
http://www.insead.edu/v1/gitr/wef/main/analysis/showcountrydetails.cfm
11http://a330.g.akamai.net/7/330/25828/20080331202303/graphics.eiu.com/upload/ibm_ereadines
s_2008.pdf
15
The ICT element is made up of:
• Internet users per head of population;
• Computers per head of population;
• Telephone lines per head of population.
The UK is ranked 11th on the KE index overall and 14th for ICT. The ICT statistics are
relevant to B2C infrastructure and financial services, and to wider citizens’ use of
ICT.
The WEF state that there are three important stakeholders to consider in the
development and use of ICT, namely: individuals; businesses; and governments.
A market economy such as the UK or the US might argue that a factor such as
the government vision of the future is less relevant than a measure such as the
number of secure servers/head of the population, for which, as seen in Table 2,
the UK ranks 9th and the US ranks 2nd.
The EIU have in their most recent analysis changed the factors the affect the
connectivity scoring, removing narrowband telephone penetration and adding
broadband and mobile phone penetration. They also use broadband
affordability – the ratio of a subscription to median household income. In
addition, they have added a new factor – electronic identity cards.
16
The list of factors measured is now:
• Broadband penetration and affordability;
• Mobile phone penetration;
• Internet penetration and security;
• PC penetration;
• WiFi hotspot penetration; and
• Electronic ID.
These factors are mostly consumer and citizen oriented, rather than focused
directly on business services, although Internet security is clearly relevant to B2B
as well as B2C financial services.
The UK ranks 5th on connectivity, behind the Netherlands, Hong Kong, Australia
and the US. On government policy, the UK ranks 4th.
The EIU report suggests five components for ensuring digital best practice as
follows, where the UK / City of London Corporation’s approach is described in
italics:
• Let the market build it: Policymakers should allow market forces to
determine the course of the digital economy. Part of a government’s
mandate is to ensure fair access to the resources that network operators
need (spectrum and rights of way, for example). The UK measures up well
to this guideline.
• Step in when needed: The CoLC has commissioned this report in order to
assess areas where it might be fruitful to step in to support the provision of
ICT infrastructure to maintain competitiveness.
• Lead by example: The CoLC leads on such areas as business continuity
readiness exercises.
• Don’t do it all - Governments must: Champion digital development; Fund
their own infrastructure; Regulate lightly; Encourage others to adopt. The
CoLC operates in an environment subject to EU, UK and local government
regulations, and within this looks to encourage both large organisations
and SMEs in the City.
• Keep at it: The CoLC has an ongoing programme of support and review
regarding ICT provision in the City.
The e-readiness index forms part of the Global Financial Centres Index (GFCI).12
12http://www.cityoflondon.gov.uk/Corporation/LGNL_Services/Business/Business_support_and_advi
ce/Economic_information_and_analysis/GFCI/
17
Table 2: Comparison of Country-wide ICT Infrastructure Rankings
World
Country Bank WEF/Insead EIU
L
KEI ICT NRI IEI ALT ADC SIS ICT GICT VIS ER Con GV
Netherlands 4 5 7 16 14 11 12 15 32 46 6 2 3
UAE 43 42 29 56 16 40 35 33 7 4 35 36 32
Germany 10 15 16 14 8 13 16 4 31 63 14 9 19
Hong Kong 26 8 11 33 23 11 22 18 17 12 2 3 11
UK 11 14 12 11 11 14 9 11 21 42 8 8 8
US 8 13 4 2 6 8 2 12 18 28 1 7 8
France 20 25 21 18 15 19 28 19 43 31 22 22 21
China 77 78 57 86 78 52 101 56 74 29 56 54 51
Singapore 21 10 5 26 12 15 18 3 1 1 6 17 6
Australia 9 5 14 10 18 23 6 19 48 40 4 6 13
Japan 19 21 19 21 10 30 17 29 15 25 18 21 7
Key:
World Bank: KEI = Knowledge Economy Index,
ICT = ICT component of this
WEF/Insead: NRI = Network Readiness Index;
IEI = Infrastructure Environment Index;
Sub-indices ALT = Availability of Latest Technology;
ADC = Accessibility of Digital Content;
SIS = Secure Internet Servers/head of population;
LICT = Laws relating to ICT;
GICT = Government prioritisation of ICT;
VIS = Importance of ICT to government vision of the future
EIU: ER = E-readiness;
Con = Connectivity;
GV = Government Policy and Vision
18
The Role of Governments
Two countries which rank highly in the ICT indices which also have global
financial centres are Singapore and the United Arab Emirates (Dubai). We
explore below the role of government in these two countries, and also in New
York, to suggest possible ways in which the CoLC could act to improve
competitiveness.
Singapore
Singapore is a small island with its people as its only resource. ICT has been
important to Singapore’s growth, and a key component of its economic
infrastructure. Singapore’s ICT journey began with the introduction of the
National Computerization Plan in 1981. As the government’s confidence in ICT
as an economic enabler has grown, the country has formulated and
implemented six ICT master plans, each guided by a developmental theme
relevant for the economy at the time. “An Intelligent Nation, a Global City,
powered by ICT” is the vision of Singapore’s latest ICT Master Plan, Intelligent
Nation 2015 (or “iN2015”).13
The implication for the CoLC is the importance of an ICT plan linking ICT to
strategic objectives.
13http://www.ida.gov.sg/About%20Us/20070903145526.aspx
14Dutta, S. and Mia, Irene, “Executive Summary”, The Global Information Technology Report, 2007-
2008, World Economic Forum / Insead, 2008, p.xiv
19
The WEF/Insead report 15 comments:
New York
New York City with a population of just over 8 million is similar in size to London
(with a population of 7 million). New York City’s Mayor has a budget of $59
billion this year, and among the many departments and agencies within his
scope is a Department of Information Technology and Telecommunications
(DoITT) which works with ICT providers to provide a range of services to the
citizens of New York City. It covers ICT for economic development and
sustainability, public safety, social services, education, community services and
city infrastructure for the agencies.
The focus of its current PlanIT is “Better Government through Customer Service”,
and its core vision is
“New York City transforms the way we interact with residents, businesses,
visitors, and employees by leveraging technology to improve services and
increase accessibility, transparency and accountability across all City
agencies”.
ICT in New York is seen as transformational for government in its relationship with
the citizens and visitors. The New York City government is seeking to radically
improve the quality of life for its citizens, and the experience for its visitors,
through using ICT.
15“Connecting the World to the Networked Economy”, The Global Information Technology Report,
2007-2008, World Economic Forum / Insead, 2008, p. 17
16
“High technology and quality of life in Dubai”, E-readiness rankings 2008, EIU, 2008, p. 17.
20
It is difficult to make direct comparisons between New York and London
because the structures are so different, as discussed below.
As part of the City of London Corporation’s role in supporting and promoting the
City’s financial services globally, it hosts and participates in a number of forums,
such as the Lord Mayor’s Financial Services Group17, and the City of London
Security and Contingency Planning Group18.
Whilst the cities compared – Singapore, Dubai, New York and London, are very
different, examples of good practice can be drawn out.
Singapore, the United Arab Emirates (Dubai) and to a lesser extent New York are
driving ICT infrastructure through government plans. They are focusing on
services to the public rather than to business. So there is a general lesson, that a
good ICT infrastructure is seen as an important part of quality of life, and hence
competitiveness. ICT needs to be seen as an enabler for not just financial
services but also for the other sectors, such as media and leisure, and education,
important to London.
None of the cities examined had publicly visible plans for ICT infrastructure
specifically in relation to global financial services.
Given the planning and other hurdles to setting up new data centres in London,
and the increasing importance of third party data centres for specialised trading
services, the CoLC could benefit from the co-ordination and publication of an
ICT plan for the City’s infrastructure supporting financial services, covering
networks, data centres, security and resilience, power supplies and skills of the
ICT supply industry.
In terms of its financial services responsibilities, the CoLC takes a broader view
across “the City”, in London, for example, including the Square Mile, Docklands
and Canary Wharf. This would set a precedent for an ICT Infrastructure Group to
take a view across the three geographies. The group could take advantage of
This has representatives from the relevant Livery Companies including the IT Livery Company.
17
The City of London Security and Contingency Planning Group covers the Square Mile, Canary
18
21
the work of the Data Centre Forum19 and London Resilience20, both concerned
with aspects of ICT infrastructure.
The Global Financial Centres Index 5 (GFCI) used 57 indices to compare financial
centres, grouped into five key areas of competitiveness:
• People, including a skilled and flexible workforce, and quality of life
measures;
• Business environment, including regulation, tax rates, and the ease of
doing business;
• Market access, including the levels of securitisation and volume and value
of equities and bonds trading;
• Infrastructure, including the cost and availability of office space, transport,
and e-readiness rankings; and
• General competitiveness, covering general economic factors.
19The Data Centre Forum has as its members Bank of America, Barclays Capital, Credit Suisse,
DrKW, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland, Societe
Generale.
20 http://www.londonprepared.gov.uk/businesscontinuity/ gives details of the extensive
22
The most relevant dimension here, “Knowledge Creation and Information Flow”,
comprised eight factors:
• Number of universities;
• Number of medical schools;
• Number of MBA programmes;
• Patent applications per million people;
• Search engine hits;
• Researchers per million people;
• Scientific and Technical Journal articles per million people; and
• Broadband access per thousand people.
21 http://www.londonchamber.co.uk/
22 http://www.london.gov.uk/mayor/economy/london-winning.jsp
23
City-specific indices comparing a wide range of factors, including ICT, place
London in pole position. This suggests that the ICT infrastructure provision in the
City is currently above a threshold level at which ICT becomes a discriminator.
Recommendation
The City of London Corporation should set up a group to develop a 10- year ICT
Infrastructure Plan in support of financial services.
24
Chapter 3: The City’s Current ICT Infrastructure
Summary
This chapter starts by reviewing recent changes in the ICT infrastructure
technology, before providing a snapshot of the status of three possible measures
of relevant ICT infrastructure for the City – connectivity through worldwide
network operators, number of suppliers of “fibre in the ground”, and data centre
capacity. Then, based on interviews, we identify strengths and weaknesses of
the current infrastructure under the headings of broadband and legacy services,
mobile and wireless services, high specification (fibre) networks, and data
centres. Power supplies emerged as a concern and are addressed further in
Chapter 4. We separately address resilience and security, and make the case
for a secure mobile network, available commercially, for use in an emergency.
Historically, ICT infrastructure could be divided into data networks for computers
and terminals, networks for fixed line telephones, networks for wireless
communications, and more recently, networks for mobile phones.
Computer Computer PC
Terminal
25
Technical trends
Over the last five years or so we have seen four significant changes in the ICT
infrastructure:
• Convergence of network services including telephony on to the Internet
Protocol (IP), which means that voice and data services share the same
network. The design of Internet networks mean that many alternative
routings are possible between two end points, see the glossary. This
commonality has caused a number of organisations to rethink their
resilience strategies.
• The shift of the major mobile operators from a focus which is primarily
voice to one which is primarily on data (including SMS messaging); and
the emergence of broadband data transmission as a wireless mobile
service, leading to the blurring of the distinction between fixed line and
wireless or mobile suppliers. Figure 2 illustrates the current position, in which
Voice over Internet Protocol (VoIP) is widely used as is internet protocols
for data networks, with TV still mostly separate at the time of writing.
Computer
Terminal
Fixed
Line Printer
Phone
Internet
Protocol
Scanner/ Mobile
Camera Phone
Television PC
These trends are driven by the demands for cost reduction and questions of risk
management. The cost of managing highly functional desktop/mobile
equipment is growing all the time, while high profile cases of security breaches
on the client side emphasise the benefits of holding data and programs in a high
security data centre environment with encrypted access from known client
devices.
26
It is likely that these innovations will lead in turn to the introduction of thin client
desktops, where most of the application software is on the server, and to mobile
devices. This will increase the demand for, and reliance on, high bandwidth
network services while reducing the power demand at desktops.
Our discussions with both users and network providers lead us to conclude that
this may prove challenging from a commercial point of view, but that the
physical infrastructure in the City is likely to be able to cope. Duct capacity is
available and the ability to move to Wave Division Multiplexing (which combines
several streams of data within the same physical fibre optic cable) on new and
some existing fibre optic cables (so as to move from single to multiple data
“circuits” within each fibre-optic cable) provides a reasonable level of capacity
“headroom”.
The third new development in the last five years is the introduction of servers
which can be densely packed in racks (commonly known as blade servers). This
greatly increases the power demand per square metre in data centres.
The use of virtualisation decreases the demand for data centre space but further
increases the power demand per square metre. Typically, the number of
machines can be halved for a given work load by using virtualisation, and some
case studies show 66% reduction.
27
Case study – Reducing the need for data centre real estate
So, what metrics could we suggest to focus directly on the ICT infrastructure
central to the City’s expertise?
28
We have suggested five headings which will be of increasing importance to the
City going forward. This list is based on our discussions with experts, and the
interviews that we conducted. The aspects to be measured are:
• The ability of the City to trade. This means metrics of connectivity, both
world-wide, and across the City between traders and trading systems;
• The capability of the City to host new applications – the amount of data
centre space available;
• The ability to supply data centres with electrical power;
• The security and resilience of the ICT infrastructure, covering both the
technology and the systems; and
• The skills of the ICT supply industry.
29
The City’s ICT installed infrastructure
Key:
Presence in City x
Representative in
City (x)
30
snapshot at the end of December 2008. It suggests that London is well served by
worldwide network providers.
Several of these worldwide network operators also have fibre in the ground in the
City, namely: BT, Cable and Wireless, COLT, Global Crossing, Level 3 and Verizon.
The City has additionally a number of other suppliers with fibre networks “in the
ground” in the City, including: Abovenet, Geo, Interroute, Neos Networks, Thus,
and Virgin Media.
The CoLC should monitor the number of worldwide network operators servicing
the City, in addition to their interest in fibre networks “in the ground”.
The first, and still dominant use, was in-house data centres for the organisation’s
own use. The applications would include customer account processing for
instance. The large financial services organisations had mostly rejected
outsourcing their main data centres, primarily on the grounds of security.
Third party data centres are used for back up purposes, and to run specialist
applications for subscribers. Data centres used for back up need high
bandwidth connections to the primary data centre, and high security. Specialist
applications run in data centres include internet services and trading systems for
financial services.
31
Data Centres
In Table 4 “Carrier neutral” Data Centres in London, i.e. data centres which
accept connections from all telcos, are shown: the banks that appear have
space in West London, remote from office space in the City or Canary Wharf.
It also appears important for the CoLC to be able to track the major data
centres, both in-house and third party, for planning and business continuity
reasons, in the same way that the telecoms infrastructure is tracked.
Additionally, our search to establish data centre capability identified that many
of the data centres in the City and City fringes were part of international groups,
so regular contact with these organisations would aid in understanding
competitiveness in relation to ICT infrastructure.
32
So, for instance, Telehouse 23 has data centres in Los Angeles, New York and
Hong Kong as well as London, and Interxion24 has 40,000 sq metres across 24
data centres and 11 countries in Europe.
The same CB Richard Ellis report used in Table 4 provided for Q3 2008 a European
overview of the stock of data centre space in the main European cities. It shows
that London had more data centre space than the other centres, with significant
availability, as shown in Table 5.
First, London has by far the greatest stock of data centre space. This comes in
many categories, of which the two main are shell (or shell and core) and carrier
neutral hotel.
The demand for carrier neutral hotel (CNH) data centre space - data centre
space where the operator allows any carrier (telco) to connect into the facility
and to connect to third parties within the facility - is growing. The amount of
CNH data centre space is a measure of the City’s activities and the extent to
which the City’s companies use outsourced services, whether internet, disaster
recovery, or specialist trading services.
Shell data centre space is space available for in-house operations, a shed. A
typical new corporate data centre might need 10,000 to 30,000 square metres of
data centre space, so that the total data centre space in London is only
equivalent to 10 new large data centres.
A possible metric for the CoLC to monitor would be the total amount of data
centre space, or if the information were available, the amount of CNH space,
23 www.telehouse.net
24 www.interxion.com
33
compared with other global financial centres. Table 5 shows that London is
better placed than other European cities, on this metric.
Additionally, data centres act as sounding boards for the business environment.
Level 3, for example, claims to be “one of the few London data centres with
100% power up time”25, reflecting the power supply concerns in London.
Equinix26, a US company with data centres across the US, Europe and Asia-
Pacific, states:
We recommend that the CoLC should maintain contact with data centres, to
complement their detailed knowledge of fibre “in the ground”.
Large organisations
Large organisations use standard retail broadband services, delivered over the
legacy local copper telephone wires (ADSL), for a range of applications such as
backup, ATM networks and home working, but mostly use fibre optic cable
delivery of very high speed services as their main technology.
Large organisations mostly use multiple vendors for resilience, but one large
organisation commented that even if the contracted service was with an
independent supplier, such as Easynet (a global managed network, hosting, and
telepresence company owned by BSkyB), the link to premises at either end was
with BT. Another pointed out that COLT and BT shared a number of physical
ducts and connection points, which for some organisations meant that they
were unsuitable as back up to each other.
Reasons for choosing a supplier vary but often large organisations choose the
supplier which is able to deliver in the time available, or because it is the
dominant supplier for a specific purpose (e.g. link to Bermuda, managed home
broadband).
In spite of some individual concerns, there is overall satisfaction with fixed wire
voice and data services. Reflecting London’s competitive position,
representative quotes from the interviewees included:
25 www.level3.com
26 www.equinix.com
34
“We buy services around the globe and by comparison the UK is good
and London is very good.”
“London is particularly good in its ICT provision. The Far East is also very
good, and COLT is not bad in Europe. Paris is good. Luxembourg is bad.”
“I think [New York and London] are pretty much on a par, although they
both have a different way of going about things, they face the same
issues. Now, if you wanted me to compare London to Dubai or Moscow,
there's a very marked difference in favour of London...”
“BT are worse in the UK than anywhere else, both initially and providing an
on-going service.”
Supplier performance in relation to new products and initial service delivery was
widely flagged as inadequate, highlighted in the discussion under ‘Skills’ later in
this chapter.
The chapter on Regulation notes the opportunity for suppliers and Ofcom to co-
ordinate the standardisation of terms and descriptions in SLAs and for the CoLC
to publish standards.
27The process of directly transferring information, services or products between users or devices
that operate on the same hierarchical level
35
SMEs
Most small organisations use standard retail broadband services, delivered over
the legacy local copper telephone wires (ADSL).
Some small organisations use leased lines but there were comments from SMEs
interviewed as part of this study that leased lines are too expensive or not
permitted by the landlord. One SME company in serviced offices was forced to
use only the standard specification ICT provided and was not permitted to install
fixed lines of its own. Other companies intimated that serviced offices do limit
scope. This could be because the landlord has an exclusive arrangement with a
particular service provider, or that the premises are physically unsuitable for the
installation of fibre networks or base stations for mobile networks.
Given the need for SMEs to use serviced offices, we recommend that the CoLC
promote building and refurbishment standards to facilitate the addition of fibre
networks and base stations for wireless networks.
SMEs had fewer problems with installation than large companies, perhaps
because they bought standardised services.
Only 10% of organisations contacted do not use SLAs at all, and they were all
SMEs. Other SMEs said that they used SLAs when their clients imposed SLAs on
them, to get back to back agreement on service levels. SLAs will become
increasingly important as organisations become even more dependent on ICT
networks, with home and dispersed working, and virtual offices.
As discussed earlier in this chapter, the technology trends and drives towards
cost savings are increasing the demand for high specification networks. Security
and resilience needs place further demands on high specification networks.
Large organisations
Specialist ICT platforms are essential for the core City activities of electronic
trading, settlement and clearing across the equities, derivatives, foreign
exchange and fixed income markets, which depend on very high speed
connectivity and latency. The need for network latency at the millisecond level
was raised by our interviewees as a requirement for trading desks. Some
organisations placed equipment at the London Stock Exchange (LSE) or other
trading systems’ premises to ensure high speed responses to trading requests by
36
traders or software. Low latency pods in the London Stock Exchange
environment were seen as an important differentiator for the City, as was co-
location with other trading systems. Some data centres specifically promote
their ability to co-locate traders with trading systems.
It is clear that all the major telco service providers, both fixed wire and mobile,
were well aware of these needs and are working hard to ensure that necessary
capacity is available. One major operator summarised the high speed network
situation as follows:
“It is clear there is a continued and insatiable demand for higher speed
services based on packet technologies such as Ethernet and IP as
traditional services decline. We see an increasing demand for high speed
services from 100Mbit/s to above 1Gbit/s on both the local metropolitan
and pan-European basis. In addition, there is a clear need for services
with lower end-to-end latency and higher resilience. We can already
address most of these requirements with our fibre network connecting
more than 16,000 buildings across Europe. Recently, we deployed a Multi-
Service Platform28 based on Ethernet over MPLS that reduces latency,
improves resilience and adds a level of flexibility that allows greater
control of services and faster delivery. We can do this because of the
quality of our infrastructure.”
The same operator also confirmed the trends observed in data centre demand:
While there is recognition that demands for higher speeds will increase, the view
is that network connectivity can be provided, albeit at higher cost.
SMEs
There were comments from SMEs using basic broadband services that they saw
a need for higher speeds for data transfer in the future. This is for backup, and to
run applications on servers without using “expensive City office space”. Some
SMEs have problems in serviced offices where it is not possible to install new fibre
due to space limitations within the building. However there is a consensus across
28The multi-service platform allows the telco to deliver voice and data services from the same
network infrastructure, software based, which allows fast service delivery as supply is enable by
parameter settings. It is also cost effective as it obviates the need for specialised networks for
voice, data and other services.
37
large City-based and City fringe stakeholders that high specification telecoms
connectivity is readily available.
WiFi is a short range wireless technology using unlicensed spectrum which allows
for over the air connection between a client (laptop, Blackberry, etc) and a
base station or between two WiFi clients. Also known as wireless LAN (local area
network), with a range of up to 100 metres. This is Supported by Blackberry and
iPHONE hand-held devices.
Our respondents felt that in London, mobile phone usage is usurping the role
once seen for WiMax, and that mobile broadband will continue this trend.
Large organisations
The picture in terms of use of wireless and mobiles is mixed. Whilst there is very
wide use of Blackberries and 3G for email on the move, there is little apparent
enthusiasm for wireless connections. Some use wireless networks for visitors or for
in-house back up. Several organisations with high security consciousness said
“We don’t touch wireless”. Others have restrictions on what can and can not be
used on laptops.
“The two worse-case scenarios are the Middle East and Russia. They're
both very expensive and poor quality.”
38
Overall, wireless networks are not seen by large organisations as currently of
mission critical quality.
SMEs
SMEs also make wide use of Blackberries and 3G mobiles for email on the move,
as a necessity. There are concerns over security as well as resilience, for
example, one SME stated that
On the other hand, some SMEs routinely use wireless within their offices for
convenience and simplicity of installation. However one SME commented that in
the Square Mile in-house wireless has very poor reception with high interference.
This is due to the high density of users in some areas.
We discuss this further in the next chapter, since the expectation is that mobile,
wireless and fixed line technologies and services will converge over the next
decade.
Data Centres
Large organisations
Large organisations such as the big investment and retail banks tended to
believe that their requirements for power, security and resilience, and availability
would stretch most external data centres. Specialist financial services suppliers,
such as those supplying trading, clearing or settlement, use state of the art ICT
platforms and in-house data centres to match. These facilities are often in data
centres owned and managed by the organisation. Large organisations mainly
use third party premises to host disaster recovery and web sites.
Large organisations often disperse their data centres to different locations. The
need for resilience and risk management means that there is a need for
separation between main/standby data centres. Data centre specialists
suggested that an ideal set up in this context was a triangle with sides up to 30
miles. One large organisation uses a data centre in Paris as back up to mitigate
against terrorist threats. Large organisations tended to use the word “paranoid”.
There is increasing support, particularly within larger organisations, for a three site
infrastructure as a vehicle for risk management. The three sites are typically
offices, main data centre and standby data centre. In respect of data centres
there is a balance to be struck between the demands of resilience and reliability
and the need for low latency. There is a continuing desire to maintain offices
within the City with a reasonable degree of access to data centres. There is a
39
growing consensus as to the optimum balance between these conflicting
demands, which is considered to be a triangular model with each side up to 30
miles long.
One could therefore see the possibility of such a scheme as shown in Figure 3
below:
Office Space – In
the Square Mile
Demand for space for data centres has recently levelled, due to the reduction in
financial services activity. There is known spare capacity in Docklands, as
mentioned earlier, and new capacity is being added to meet the demands of
the Olympics, among others.
Data centre space is not flagged by our respondents as currently a problem, but
in the next chapter we discuss the problems of adding new data centre
capacity, in the context of the impact of advanced technology in reduction of
space and power requirements for a given processing load, versus the expected
increases in demand for more ICT transactions.
40
SMEs
Some small organisations used hosting in third party premises to reduce cost –
remarking “City space is expensive” (i.e. the Square Mile). Others used third
party hosting as part of a risk strategy, so that one SME reported that
“Our physical security is based on using external [server] farms [in a data
centre], well secured (except for aircraft strikes in the US). We use back up
systems [widely and our in house network is physically well secured. But
reliable power supplies through the Grid are a problem in London, which is
why we go outside the square mile for servers and storage”.
Another SME identified that, with external hosting for backups, instant access is a
concern, and high specification networks to and into the building are needed.
Power Supplies
Large organisation
Power was mentioned by many respondents.
Most organisations feel they have adequate Uninterruptible Power Supply (UPS)
capacity through batteries for an orderly close down of operations.
A couple of organisations have fears about the demands for power from the
2012 Olympics, although EDF Energy Networks states that plans are in place to
meet the demands of the Olympics in addition to those of the City, and that the
plans in National Grid for power transmission are also in place.
41
SMEs
Several smaller organisations have plans in place to use other offices in the UK or
overseas to continue business in the event of longer power cuts, linking via the
internet.
Power supplies and associated planning and regulatory hurdles for new
generating capacity are discussed further in the next chapter, together with EDF
Energy Network’s response.
Sources of threat
The City is a noted global centre and the financial services in the Square Mile, in
Docklands and Canary Wharf, and in other parts of the country are an important
part of our critical national infrastructure29, as discussed in the brief issued by the
Parliamentary IT Committee (Pitcom).
The threat from espionage (or spying) against the UK did not end with the
collapse of Soviet communism in the early 1990s. Several countries are
actively seeking British information and material to advance their own
military, technological, political and economic programmes.”
42
The City, with reference to the Square Mile, Canary Wharf and Docklands, is not
homogeneous in terms of risk, as one of our respondents pointed out:
“The City core [the Square Mile] is the best served of the three in terms of
risk management and Canary Wharf the worst because of its exposure
and limited transport and power routes. Docklands is seen as a standby
site for the City and Canary Wharf. There are many contingency centres
there but few main offices.”
Another respondent pointed out that the Docklands contained data centres
handling a lot of network traffic, with consequent major disruption if this went
down.
During the study, it was pointed out that there is co-ordinated business continuity
planning across the three areas in the City, but that there was not a similar co-
ordination for ICT infrastructure. Given the increasing importance of ICT in
financial services, we recommend (see Chapter 2) that a joint body should be
set up to look at the ICT infrastructure of the “City”, on the lines of the City of
London Security and Contingency Planning Group, to develop a10- year ICT
Plan.
The likelihood of such an event in the UK is low but it would be particularly difficult
to manage as we are a ‘power island’, (the continental interconnector cannot
be used to help restart the network). There are a number of designated ‘black
start’ power stations that will be used in such circumstances to resume supplies
that will be gradually be built up through a number of power islands. Once
these are established they will need to be synchronised and linked. Following
this, power can progressively be established across the network, maintaining a
balance between supply and demand.
The City is an area of high demand with no generation, so it will not receive any
power until late in the reconnection process. It should therefore be noted that a
failure of the electricity transmission network could result in power loss in the City
for over 12 hours and demand management for a further few days.
43
• City workers facing uncertainty about the journey home;
• Food outlets becoming unavailable;
• Retail trade and EPOS services suspended; and
• Major workload for emergency services.
The case study below illustrates the four dimensions of business continuity –
computer systems, people, networks (telephone and computational) and
physical sites.
It is often the case that an unexpected factor is found during these exercises. In
one exercise, a well-designed cascade system had been put in place so that
nominated staff had a list of people to call after an emergency. The people that
had been called then had to call an emergency number and leave a voice
mail. A “real” test of the process found that a zealous employee had reduced
the amount of storage rented for voice mail, on the grounds that 50 messages
was plenty – the 5,000 staff were able to call in but only the first 50 were able to
leave a message.
Turquoise offers an innovative trading platform for Europe. Its members include
the largest banks and brokers active in European trading, as well as specialist
trading firms and institutions with local, regional and sectoral focus. The
Turquoise Multilateral Trading Facility (MTF) has secured market-making
relationships with key stakeholders that, together with its wide membership,
differentiated functionality and competitive pricing, ensure a critical mass of
natural liquidity.
The technology and connectivity which underpins the thousands of orders per
second the MTF processes must be both robust and resilient. For this reason,
according to Chief Technology Officer Alex Krovina, every quarter Turquoise tests
its ability to continue trading in the event of a major disruption to the trading
systems or telecommunications infrastructure. “One of the major requirements
for us is that we require redundancy and disaster recovery facilities” he notes.
“So if a failure occurs, it is automatically monitored and corrected. If it cannot
be corrected, we relocate to our alternative site and activate our Business
Continuity Plan.”
Recently, for example, a “disaster event” was simulated during a trading day to
make sure that Turquoise could continue trading if a site was lost. The event was
unannounced and simulated a major failure. Members of each team were
relocated to the Disaster Recovery site during the event. The company was able
to continue to operate from this new site without any interruption or impact on
members; they saw business as usual.
44
Large organisations
In analyzing the risks associated with various technologies, it is clear that a wise
user will assume that networks are insecure and take steps, outside the network,
to secure their assets both physical and logical. All the larger financial institutions
and their suppliers appear to do this.
Large organisations take responsibility for their own physical and logical security,
both in their data centres and across networks and third party data centres.
One has introduced a complete failover solution at the data centre to ensure
resilience. Large organisations tend to take a two prong approach. First they
insist on secure protected network routes with no crossover so that disaster
recovery (DR) is not impacted if the main route fails. Additionally they encrypt
any client data. Dual supply of fixed line is frequent, but not of mobile phones or
wireless connections, which are not thought of as mission critical.
“We assume all networks are insecure and don't enter into contractual
arrangements about this. We undertake all our own security.”
SMEs
Most SMEs assume low levels of security on networks they use and take
precautions accordingly, such as encryption. Their precautions in some cases
matched those used by the larger financial services organisations. Some,
however, considered their infrastructure suppliers as secure, and a few others are
not deeply concerned about security outside avoidance of viruses etc.
It could be that this is a topic on which guidance for SMEs would be helpful.
45
addition they have ready access to mobile generation equipment that
can be deployed to restore power to specific sites such as local
exchanges for the fixed wire telephone system (FTN) and mobile base
stations, as part of a co-ordinated response with other utilities.
• Lack of clarity in priority of telecoms service restoration, particularly
amongst competing providers who use the same set of contractors for
maintenance.
• Flooding in London could affect power provision as well as the availability
of back up ICT services, with the ICT infrastructure unable to kick start the
power supplies or vice versa.
One respondent pointed out that, post 9/11, the US emergency services were
supported by a national system which was widely available. New York City is
utilising this for their agencies in New York. In the UK, in contrast, if the mobile
network goes down:
“We have only one SIM card on the Government system. As
demonstrated on 7 July, this does not provide resilient coms and in
practice is of limited benefit. It also has to be switched by the operator for
selected parts of their network. We have walkie-talkies, and other back-
up devices, but there should be more provided by the authorities.”
The CoLC’s business continuity programme receives high praise but there are
some comments that it needs to take a wider scope, for example:
“The City [of London] staff believe they are better set up than New York,
though New York is working very hard on these security issues. Such liaison
as there is seems to rely on the dialogue the City [of London] has with the
senior security staff at the major banks, which operate under national
regulatory control in New York as well as in the City of London. I found no
evidence of any liaison directly between the two City authorities.”
46
keep the government emergency committee COBRA and associated feeds
operating even if the main telecommunications nets go down; a similar
approach could be appropriate in the City.
We found that most City stakeholders are well aware of security and resilience
concerns, and continuously assess threats and responses. CoLC contingency
planning and readiness exercises are well regarded and could be extended to
cover master classes and seminars.
“There are often problems during installation. After that, things tend to be
OK. This applies to all suppliers.”
Regarding staffing for data centres, one respondent compared London and
New York favourably with Dubai. One SME commented that finding staff is far
easier in London than in Caracas or Switzerland, and another on the advantages
of an open city like London for recruiting staff.
47
SWOT Analysis: Summary of Results
Table 6 below serves as a summary of the main points, under the headings of
Strengths, Weaknesses, (both internal factors) and Opportunities and Threats
from external forces. It is divided into two tables, one for large organisations and
one for SMEs,
Table 6: SWOT Analysis for the City’s ICT Infrastructure: large organisations
Strengths
• Large organisations operating in the City are mostly global operators
with the staff and the knowledge to use ICT effectively.
• The telecoms market appears to be working to deliver ICT connectivity
infrastructure.
• Large organisations recognise that industrial strength connectivity
offering security and resilience can be provided at a price.
• Price of ICT infrastructure seen to be competitive.
• Positive comparisons of ICT infrastructure with other global financial
centres.
• Multiple worldwide network operators service the City.
• Spare capacity for data centres at Docklands.
• Well regarded approach by CoLC to business continuity.
Weaknesses
• Large organisations noted a lack of quality staff in the suppliers,
particularly noticed when installing new services.
• Power availability concerns are leading decisions to locate data
centres outside the City.
Opportunities
• Provision of high security and resilience mobile services accessible to
both City organisations and the emergency services, for use in a
sustained emergency.
Threats
• Viability of some ICT suppliers in current climate.
48
Table 7: SWOT Analysis for the City’s ICT Infrastructure: SMEs
Strengths
• SMEs are overall content with the “retail” ICT infrastructure.
• Price of ICT infrastructure thought to be competitive.
• Staff easier to find than in competitor cities.
• Spare capacity for data centres at Docklands.
Weaknesses
• Some providers of serviced offices do not provide the capability
(space) for easy installation of WiFi base stations and fibre networks.
• Power availability concerns as well as the price of space are leading
decisions to locate data centres outside the City.
Opportunities
• CoLC Building Regulations could promote the need for space and
access provisions to install base stations and fibre networks.
• Provision of commercial high security and resilience mobile service for
use in a sustained emergency.
Threats
• We found limited strategic planning for ICT infrastructure or awareness
of suppliers’ plans in user organisations.
• Viability of some ICT suppliers in current climate.
Recommendations
Within an overall 10- year ICT Infrastructure Plan, the City of London Corporation
should:
• Monitor the number of worldwide network operators servicing the City;
• Maintain contact with data centres, to complement their detailed
knowledge of the networks, and maintain a view of the data centre
space and its uitlisation;
• Consider sponsoring or commissioning a commercially available secure
and resilient mobile network, especially focused on availability during
sustained emergencies.
The CoLC’s readiness exercises are well regarded and should continue. They
could perhaps be backed up by seminars and Master Classes.
49
Chapter 4: The Medium Term Outlook for the City’s ICT
Infrastructure
Summary
This chapter starts by reviewing the role of planning on the organisations
surveyed. We discuss the medium term plans for the ICT infrastructure under the
headings of broadband and legacy services, mobile and wireless services, high
speed (e.g. trading) services (often global), and data centres for large
organisations and for SMEs. We discuss mobile and home working and the
relationship to Green policies. We discuss the implications of the Wigley report
on ICT infrastructure, and suggest that Green policies are already having, and
will have in the future, a major impact on data centre design and location. We
also suggest some specific topics for guidance that the CoLC could provide for
SMEs.
Large organisations
There is a significantly different approach to planning ICT infrastructure between
the large organisations and SMEs interviewed.
SMEs
About a third of the SMEs interviewed have 3- or 5-year plans. Some of the SMEs
which are actively documenting plans are prompted by the need for new
50
funding or new premises. At least two have just discarded their plans as a result
of the impact of the credit crunch on their clients. The plans of SMEs are
marginally more weighted towards competitiveness and innovation, or to
meeting their clients’ needs, than on cost reduction.
In most cases the SMEs feel that they are too small to work with their ICT suppliers.
Some, however, have worked with suppliers, after hitting capacity problems,
while others drive innovation in-house using standard technology. Where
undertaken by SMEs, in-house development appeared to be very specialised to
the SME, and part of their business package. For more commonplace
applications they use standard products available externally.
This suggests that SMEs could benefit from guidance on planning, combined with
access to suppliers in forums designed to give a forward view.
There are widespread plans to move to Internet Protocol (IP) networks, for both
large and small organisations, with comments such as
There are concerns about reliance on IP, including putting “all ones eggs in one
basket” with the possibility of voice and data services going down together, and
regarding the quality of connection, but the general expectation of those
concerned is that things would improve rapidly and that higher reliability can be
built in where necessary. Overall the opportunities, including cost saving, out-
weighed the disadvantages, such as short term disruption, for almost all
respondents.
The benefits of a common network are thought to exceed the dangers, which
could be mitigated by attention to back up and routing.
Large organisations
In Chapter 3 we discussed the trends driving the increasing requirement for high
specification networks. With the large number of worldwide network operators
providing services in the City, the City is felt to be in a good position to cope with
volatility of ICT suppliers through mergers and acquisitions.
51
Trading Systems
Trading systems will require significantly increased capacity for high speed
connections, particularly if the processing is done at a remove from the trading
desk.
SMEs
Several SMEs expect to increase their use of fibre for connection to backup
systems and for running applications in remote data centres.
Suppliers
The suppliers we interviewed are confident of meeting demand over the next
decade.
Mobile phones and wireless services are expected to converge with fixed line
services over the next decade and a mix of technologies will be used by any
given supplier. The use of these mobile and wireless services can be discussed
under two headings:
• Staff outside the office, whether at home, or on a customer site, for
example;
• Connections inside the office, where WiFi is used to connect over short
distances as an alternative to fixed line cabling (as discussed in Chapter
3).
Large organisations
“Culturally we are not ready for home working but we think this will
become common in 3 to 5 years.”
There is evidence that large organisations would very much like to use the
flexibility of home working to reduce the costs of office space, although only a
few have achieved this yet. The effort and cost of commuting is also a reason
for allowing home working. Use of international mobiles services are flagged as
likely to increase, as key financial services staff are based outside the UK. Green
policies appear to be only a secondary reason for promoting home working.
52
SMEs
Smaller organisations tend to use mobile working for the convenience of staff,
both for home working and the needs of staff “on the road”. A few organisations
note the advantages of mobile connectivity for staff who operated out of the
office, for instance engaged in maintenance or personal services. SMEs also use
home working to reduce the costs of office space. The effort and cost of
commuting is also a reason for allowing home working, and connectivity to the
office network is becoming less of a hurdle.
Wireless is used much less than mobile phones. The call success rate and call
maintenance levels of wireless technologies are currently deemed inadequate,
as one respondent put it:
Meanwhile the placing of base station sites for in-house wireless networks needs
“creativity”, using railways, and property companies and data centre operators
among others in order to provide service in the City.
“We are worried about single points of failure. Our IP network handles
data networking and we use traditional telephone technology for voice.
We don't want something on the network that takes out PCs as well as the
telephones. Things will become cheaper as a result of convergence but
there is a need to isolate data from voice.”
Flexible working has been promoted as a way of reducing office space needs,
and as a contribution to the Green agenda.
53
The case for reducing carbon emissions is less clear. In the BT case study, with
many staff commuting by public transport and an energy efficient building, the
net effect of home working was to increase CO2 emissions.
This case study is extracted from “BT Carbon Impact Assessment Service”.31
BT’s challenge was to reduce CO2 emissions from Stadium House, a mixed use BT
building containing call centres, data centres, telephone exchanges and staff
leisure areas. The emissions were categorized as:
• Contributed by workers and their mobile equipment and transport;
• Externally procured services;
• Building infrastructure including the fixed ICT infrastructure.
The majority of the emissions were from the building’s use of electricity. This
divided into:
• BT 21st Century Metro Node 3%
• Data Centres 24%
• Air conditioning/cooling 21%
• Network infrastructure 52%
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Data Centres
The Wigley report – see box – has focused on data centres for electronic trading,
where the need for fast response times (low latency) require that data centres
be sited near to the desks of the traders.
The Wigley Report, discussed in Chapter 2, has raised two areas of concern
about the infrastructure needed to support the financial services activity of
London, as part of its wider competitiveness brief.
The report also proposes a campus of new data centres to run electronic trading
applications which are sensitive to response time. This would tackle three
problems:
• Telcos could focus their efforts on providing high specification
connectivity to this campus;
• The data centres could be built to conform to “green” standards, for
instance re-using the heat created by the large numbers of computers, in
a way not practicable in much of the existing City real estate; and
• It would focus the power requirements and allow them to be planned for
– a data centre can use as much electricity as a small town.
The report suggests that such a campus would give London-based firms cost and
scale advantages over other financial centres.
Whilst this is certainly true, and would be a benefit, a number of our respondents
were cautious about any approach which did not include plans for resilience.
They were concerned that there should be physical separation between the
main and backup facilities, even if this meant losing some latency advantage
when in backup mode.
55
The report concludes that there will be additional demand for data centres able
to handle trading systems and provide co-location, as well as to cope with the
higher power supply and cooling requirements of new technology.
Large organisations
Our respondents tell us that data growth has been “enormous” over the last
decade, but they expect it to level off during the next period, for back office
processing and line of business applications.
“We run social messaging internally and a professional site for our 30,000
users. The company stores information all over the place. Storage issues
make no meaningful dent on what we do.”
Large organisations plan to increase the in-house capability for line of business
applications rather than use third party data centres to run their applications. So
the CoLC might be concerned at statements such as:
SMEs
The level of service that is expected from data centres will continue to increase.
As one SME running a service in a data centre observed:
Most SMEs expected to continue to use data centres for line of business
applications and for back up, due to the high cost of space in offices.
56
We expect that overall the demand for specialist data centre space from
financial services organisations will increase year on year over the next decade.
Power supply
The case study in this section illustrates the hurdle for one organisation, which
would like to add data centre capacity in the Docklands. In its view, the
situation in the UK is that it costs £10M more to set up a data centre in the UK
compared with elsewhere in the world. This cost difference arises from power
supply issues.
When we asked about power supplies to data centres we found that there are a
number of concerns about the ability of EDF Energy Networks to provision new
data centres:
“In London EDF Energy Networks has proved problematic and rarely
meets the 90 day commitment for a concrete offer of power delivery and
are not easy to work with because they find it difficult to deploy the
appropriate levels of planning skill.”
“Currently
data centres will seek to position in [EDF Energy Network’s]
competitor’s territory where the planning is more effective.”
Additionally the power requirements for the next generation ICT technology
(blade servers and virtualisation) are higher per square metre of data centre
57
space than previous generations, as discussed in Chapter 3. This has
ramifications for the design of data centres and their ability to dissipate heat. As
one respondent pointed out:
The electricity supplier for London, EDF Energy Networks, points out that:
One is that the UK regulatory regime results in costly power, in the perception of
several large organisations. In the view of many of our respondents, power
availability and reliability in the City is already a competitive disadvantage. We
recommend that the CoLC spearhead a discussion with the government and
regulators on this.
In order to ensure that all parties are able to plan, we suggest that the 10- year
ICT plan introduced in Chapter 2 should cover the issue of power supplies and
Green ICT regulations, in addition to the network infrastructure and data centres
discussed in Chapter 3. This would need to cover all the areas inside the M25
and hence would need to be coordinated with other boroughs. A 10- year plan
would give EDF Energy Networks and the regulator a more certain framework for
their discussions than a data centre by data centre approach.
We recommend that a 10- year ICT Infrastructure Plan be developed with EDF
Energy Networks and the GLA, which takes into account power supplies and
Green ICT regulation in the context of data centres.
Green ICT is defined as the process necessary to reduce the footprint of CO2
from the operation of ICT equipment. A flurry of early activities centred around
the recycling and disposal of equipment, and this is now enshrined in European
directives. Few organisations had issues with the EU’s WEEE directive on the
recycling of hardware, larger companies simply sending it back to the
manufacturer.
58
Attention is now moving to the regulations that will affect the policy for data
centre location over the next decade. Of particular relevance to the City is the
approach taken by the GLA to planning applications for data centres, in one
case requiring a renewable energy criterion which was not felt to be feasible.
The following case study is of a company that was able to make use of
renewables, but outside the M25.
59
Case study - Lack of energy supply threatens City expansion
One of the world’s leading information providers has a major global data centre
(DC) in the Docklands. The Docklands DC is a vital element of the organisation’s
global network, pumping information and data around the globe in real time. As
financial markets become more sophisticated and interconnected, the business
needs to be well-placed to respond by ensuring that its networks are capable of
performing at the high speeds and capacity levels that financial information
clients increasingly demand.
The company would like to expand and develop its Docklands DC site, but its
ability to do so is inhibited by uncertainty over whether adequate energy supply
exists to permit the development. EDF Energy Networks, the only available
supplier of power for the site, has asked the company to contribute to the start-
up costs for an additional power plant in the area, which, at several million
pounds, is a significant sum.
As the company understands the situation, the underlying issue relates to the
regulatory requirements that power companies face in the UK. Power
companies in the UK have a disincentive to embark on major new projects, such
as building power stations, because they must ensure that their customers will not
face price rises in the event that such projects are not profitable.
Moreover, the current situation means that the business may need to consider
moving its data operations to countries where access to essential power
requirements is not in question. Over 1,000 people are employed in the UK by
the company to maintain its data networks alone.
Large organisations
Among survey respondents, there is almost universal awareness of the Green ICT
agenda and the likelihood of increased environmental regulation in future.
Some support this on principle:
60
“I’m responsible for large amount of power consumption and I think about
the green issues surrounding this all the time. If I can do anything to
reduce consumption, I will.”
“Town planning is an issue because planners have difficulty with land use
classification for data centres. Moreover in a test case 18 months ago for
an application at Stockley Park, the GLA called in the application and
applied a renewable energy criterion. If this sets a precedent it is not
good news, because the way it was done did not take account of
engineering practicality or cost effectiveness. No-one objects to energy
efficiency, quite the contrary, but the demands from planners need to be
sensible from an engineering point of view.”
Regulation to reduce carbon footprints within the GLA34 area may force data
centres outside the M25.
This reinforces our recommendation that the CoLC should work with the GLA and
EDF Energy Networks to establish a 10- year plan for ICT infrastructure including
network connectivity, data centres, the effects of Green ICT and new forms of
electronic trading.
34 www.london.gov.uk/gla/tenders/docs/environmental_policy.pdf
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Case study - Moving to greener pastures
When the company started live trading in European equities in March 2007, it
operated through a data centre in the Square Mile supplied by its (then) parent
company, Instinet, which, in its own right, has more than 35 years history
pioneering electronic trading technology. However, it quickly outgrew the office
space capacity available and so had to consider options for expansion.
The company decided to locate to a new primary data centre at Slough Estates,
west of London, where the energy is supplied by the largest biomass combined
heat and power plant in the country. In the opinion of Chi-X’s programme
manager for the data centre relocation, this move would bring the benefits of
much-needed capacity and would also begin to make a big dent in carbon
emissions:
“For the last few years I have been looking to do what I can to lower data
centre carbon footprint.”
A reluctant choice
Despite the improved energy profile the new facility will bring, the decision to
move out of the Square Mile was not taken lightly. As the programme manager
explains, one of the key issues for an operation like Chi-X is that, because trading
takes place in microseconds, the distance between the button the trader
presses and the data centre is of crucial importance:
“The closer I can get to the button the better,”; “When you get down to
microseconds, even at the speed of light, distance does start to become a
consideration.”
But the big problem, he says, is the lack of power capacity in the Square Mile
and Docklands. Although he would have located the data centre in the City “in
a heartbeat”, he was well aware that power companies would be unable to
offer any realistic solutions:
“From my perspective the problem of power capacity is probably one of
the biggest constraints on economic activity and growth in the City.”
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On the whole, Green ICT is taken on board when it is sound business practice or
regulated:
“We find the lowest cost route to meet environmental regulation. There is
no commercial advantage in being green in the City.”
SMEs
SMEs are very much less systematic in their approach to Green ICT than the
larger companies, and it often seems to be a matter of personal choice.
Although a significant number of SMEs do take the issue seriously, others see little
advantage in being green.
Another very small company with a tiny carbon footprint finds questions from
government clients on its policies and use of Green ICT to be unhelpful.
The Pitcom brief mentioned earlier highlights the danger of physical attack on
choke points in data communications networks, such as the London Internet
Exchange.
Electronic attack divides into two forms, hackers and cyber crime. As the Pitcom
brief discusses, the evidence for hacking activity from Eastern Europe, Russia and
China on an international scale is not in the public domain, but is of increasing
concern for the security services. Cyber crime is more financially driven, with
systematic attempts by organised criminals to deceive, using “phishing” through
targeted emails looking to gain information enabling the transfer of funds, or
“denial of service” attacks used to blackmail organisations that rely on internet
connectivity. Jonathan Evans, Director-General of MI5, sent a letter to 300 chief
executives and security chiefs in banks and accounting and legal firms telling
them that they were under attack from “Chinese state organisations”35, an
allegation that the Chinese Embassy denied.
A summary of the MI5 warning, posted on the website of the Centre for the
Protection of the National Infrastructure, says:
35 see Appendix 3
63
“The contents of the letter highlight the following: the Director-General’s
concerns about the possible damage to UK business resulting from
electronic attack sponsored by Chinese state organisations, and the fact
that the attacks are designed to defeat best-practice IT security systems.”
First, the SMEs that we interviewed were more diverse than the large
organisations - banks, insurance companies and stockbrokers - were. Some SMEs
were parts of global organisations while being small as a unit, others were
focused on the City. It is therefore difficult to generalise. But perhaps the major
difference is that in large organisations there was often a range of people to talk
to – and in several, the need to involve several people to answer our questions
because of the variety of interested parties. In SMEs there was generally only
one person to talk to and they were often stretched in several directions.
This leads us to a comment on the nature of helpful support for SMEs – it needs to
be available when the responsible SME staff member has time to absorb it.
While large organisations are all using fibre networks, as were the suppliers, some
SMEs are only using retail broadband. These mostly expected to start using fibre
for access to data centres or for back up, in the near future, while using retail
broadband or mobiles for access from home and remotely to the office.
There are, however, five areas in which we recommend that support specifically
for SMEs could be provided, on topics where on the whole, large organisations
were self sufficient.
Planning
We found, as discussed earlier, that SMEs do not typically plan ahead for ICT
infrastructure. The CoLC could provide guidelines on business planning, and also
host a series of seminars, focused on SMEs, staffed by suppliers on the future
directions of ICT infrastructure.
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Access to high specification (fibre) ICT Infrastructure
SMEs have a requirement for high specification infrastructure to give good
response time for outsourced systems. The maps of fibre networks held by the
CoLC cannot be disclosed, but the City Property Advisory Team can assist SME’s
here.
Data security
SMEs tend not have specialist staff concerned with data security. Some
guidance on standards “fit for purpose” in an age of electronic hackers and
outsourced data centres could be helpful.
Recommendations
65
Chapter 5: Regulation
Summary
This chapter has been written with input from Netstrategics Limited, a boutique
consultancy specialising in telecoms regulatory issues. We start by considering
the changing aspects of financial and business regulation before looking at
telecoms regulation. European and Ofcom regulation is thought to be currently
broadly helpful to the City. The scope of regulation will broaden from fixed line,
mobile and wireless to channels historically used for entertainment, and
broadcast technologies. The regulators need to reflect the convergence of
mobiles, wireless and fixed line networks within a single operator. It is also felt that
the regulators should ensure that upcoming spectrum auctions do not
compromise the competitiveness of the City, and that, in this changing world,
the regulators could take a lead in standardising terminology for serviceability, to
enhance the effectiveness of peering in increasing network resilience.
The Financial Services Authority (FSA) has stated clearly that they take no view
on ICT infrastructure as such. They aim for principles based regulation and on
facilitating good practice.
“We expect the regulated to comply. How they comply through ICT or
without ICT is for them to determine”.
One area of specific concern is the European Central Bank’s (ECB) requirement
for the critical financial services infrastructure: that business must be recoverable
inside two hours (Europe) compared with four hours in the US or by the next
working day (Financial Services Authority in the UK). The City’s organisations are
likely to be under pressure to meet European standards for recovery inside two
hours, as trading systems in particular become more integrated across Europe.
This has clear implications for suppliers of ICT infrastructure and trading systems.
The Regulation of Investigatory Powers Order (2002) which allows the Bank of
England to require information on electronic transactions is not thought to be a
practical concern in terms of confidentiality; organisations realise that anything
sent by email should be regarded as liable to scrutiny.
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The future of FS regulation
Our respondents and the Financial Services Club36 believe that the industry will
find itself subject to a level of regulatory and supervisory scrutiny as never seen
before.
This will lead to a Global Supervisory Framework (GSF), developed by the G20
over 2009 and enforced from 2010 onwards. This Framework will focus upon
bank leverage and lending, along with the use of derivatives and the inherent
flaws in the risk models that support such instruments. There will also be a major
overhaul of credit rating agencies and how these operate.
Already there is talk of creating an Equitas for the banking industry as was
created for the insurance industry37. Alongside these global changes are
regional implementations of new trading and clearing policies as dictated by
the European Commission, as well as new competitive and innovative trading
instruments launched as a result of the MiFID and other competitive forces.
Overall, this means that the City ICT infrastructure has a number of challenges for
the medium-term, in particular:
• Linking to new global and regional Central Counterparty and risk
management systems;
• Creating plug and play, low cost connectivity across all exchanges and
clearing systems; and
• Creating consolidated pricing and risk management systems.
The competitiveness of the City will be evaluated in terms of its ability to provide
these links to other Global Financial Centres, and hence the importance to the
City of the number of Worldwide Network Operators operating in London. As we
showed in Chapter 3, London is well placed on this measure.
36 The Financial Services Club is a forum for London based FS organisations to share best practice
and anticipate change.
37 Equitas, based in London, was established in September 1996 to reinsure and run-off the 1992
67
International, EU and UK telecoms regulation
The European Commissioner for Information Society and Media, Viviane Reding,
has addressed issues regarding mobile termination rates, mobile roaming, and
Voice over IP, in the last two years. An attempt by the Commission to take more
powers at a pan-European level (creating a pan-European regulator, and a veto
over NRA decisions) was opposed by the European Parliament and EU States,
and has now been watered down. It seems likely that this will make it more
difficult for the Commissioner to force other EU countries to open their markets to
competition to the same degree that the UK has done.
In the UK, the Office of Communications Act 2002 created the Office of
Communications (Ofcom) from a number of previous regulators with
responsibilities across television, radio, telecommunications and wireless
communications services. Ofcom is thus ideally placed to address issues of
“convergence”, where broadcasting and telecommunications services begin to
merge (for example, through pay TV, IPTV), and spectrum issues (including the
so-called “Digital Dividend” – spectrum currently used by analogue TV
broadcasting which will be freed up when digital terrestrial broadcasting
supersedes it).
The Framework was incorporated into UK law in the 2003 Communications Act.
Under the Act, Ofcom has Statutory Duties:
• To further the interests of citizens in relation to communications
matters; and
• To further the interests of consumers in relevant markets, where
appropriate by promoting competition"39
38 http://ec.europa.eu/information_society/doc/factsheets/tr9-listofmarkets.pdf
68
It has been suggested (for example, by the Communications Management
Association) that this focus on “citizens” and “consumers” means that Ofcom
does not have an explicit remit to support business. Ofcom states that a remit to
support business is implied.
Ofcom takes the view that competition between operators offers the best
prospect of providing customers with a wide range of services at the best prices.
So, amongst Ofcom’s “Regulatory Principles” are “a bias against intervention”
and the use of the “least intrusive regulatory mechanisms” – that is, acting only
when the market will not operate effectively. This leads to an emphasis on
regulating the wholesale market, while tending to de-regulate the retail market.
The Act removes the need for a company to apply for an individual licence to
operate telecommunications services (“Electronic Communications Services”,
ECS)40. Companies can apply for powers under the ECS Code to dig up the
streets and access people's property in order to build and maintain electronic
communications networks and services. In all, some 150 organisations now have
powers under the ECS code.
39 http://www.ofcom.org.uk/about/sdrp/
40 There remains a licence regime relating to Radiocommunications Services, so services such as
mobile telephony that require radio spectrum may depend on having a licence for that spectrum.
41 http://www.ectaportal.com/en/basic651.html
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Broadband and legacy services
Voice services have been open to competition for many years in the UK, and the
City of London was the area where intense competition first became a reality,
with City of London Telecoms (COLT) and others entering the market after the
ending of the BT/Mercury Duopoly in 1992. International services in particular
have been highly competitive, with resellers taking a large share of the market.
Broadband services offered by most of BT’s competitors are either resold versions
of BT’s wholesale products or provided via Local Loop Unbundling (LLU), where
the operator connects the customer’s line, or just the broadband part of it, to
their network instead of to BT’s. Exceptions to this include Virgin Media, a cable
TV company, and a number of small operators offering services using WiMax and
similar radio-based technologies. All of the exchanges in the City and the City
Fringe region have been unbundled, by up to as many as 6 different LLU
operators42. Exchange areas with more than 4 LLU operators are designated by
Ofcom as being “competitive” and have no regulatory price controls.
Areas with LLU tend to coincide with cable TV coverage and, other than a
handful of rural WiMax schemes; broadband technology tends to be used to
provide business services in London and other large cities.
42 http://www.samknows.com/broadband/mapping/mapping.php
43 www.ofcom.org.uk/consult/condocs/nga_future_broadband/
44 www.berr.gov.uk/files/file47788.pdf
45 http://www.computerweekly.com/Articles/2009/01/26/234457/the-carter-review-digital-
britain.htm
70
security, reliability and cost are increasingly critical factors. As discussed in
Chapter 3, these circuits are typically optical fibre running through underground
ducts. It is easy to increase capacity on existing routes, but often expensive to
add new routes.
The main topics regulated by Ofcom and relevant to the City, in relation to
mobiles and wireless, are spectrum, termination rates (including international
roaming) and mobile number portability. These are explored in more detail
below.
Spectrum
A mobile provider reaches the customer’s device by using radio frequencies
(that is, spectrum). Spectrum is limited, and providers operating at similar
frequencies may find their services interfere with each other.
Figure 4: CELA area
46 www.ofcom.org.uk/consult/condocs/bcmr_tisbo
47By “traditional”, Ofcom mean that it uses one of the technical standards commonly used in
telecommunications networks, rather than those, such as Ethernet, which have become popular in
the Internet.
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Ofcom therefore licenses the use of much of the radio spectrum. Its strategy is to
release as much as possible to the market, while remaining as “technology
neutral” as possible - that is not deciding in detail in advance what technologies
should be used for a particular radio frequency48. The main benefits of a
licensed spectrum are that interference issues are likely to have been resolved in
advance, that standards are often more advanced, settled and international,
and that vendors have made more of a commitment to develop devices and
network equipment.
48 http://www.ofcom.org.uk/radiocomms/spectrumawards/
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Two blocks stand out as likely to see the fiercest bidding:
• 2500-2690MHz spectrum, often referred to as “WiMax”; and
• 470-854MHz, the “digital dividend” that will be released when analogue
TV signals are switched off completely in 2012.
In addition to licensed spectrum, many services are also being provided over
freely available “unlicensed” spectrum. These services can range from
communications between taxicabs and their controllers, to theatre
microphones, Bluetooth headsets, restaurant credit card devices, or existing
“WiFi” wireless broadband (e.g. public hotspots for internet access provided by
The Cloud or BT’s Openzone and home wireless networks). Ofcom has no plans
to convert these unlicensed frequencies to a licensed regime.
Overall the largest impact of spectrum policy and auctions on businesses in the
City and Fringe is the extent to which this allows a wider, more innovative and
cheaper set of wireless broadband services to be provided, both as direct
competitors to fixed broadband networks and as resilient backups.
The current control will continue until March 2011, by which time termination
rates should be no more than 5.1 pence per minute. The retail price paid by a
customer to call a mobile number is higher than the termination rate – and it is
unregulated.
This form of regime is likely to continue after 2011, with further pressure to reduce
voice termination rates from a number of EU Directives and from statements by
Commissioner Viviane Reding49.
49http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/708&type=HTML&aged=0
&language=EN&guiLanguage=en
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calls while roaming to other EU countries. By August 2009 the ceiling for making a
call will reduce to 43 eurocents per minute, for receiving 19 eurocents.
The EU has now extended that legislation to cover text message charges and
data roaming (which includes internet browsing and email)51. From July 2009, it
will cost no more than 11 eurocents to send a text within the EU while roaming,
and the wholesale charge for data roaming will be 1 euro per megabyte. Voice
charges will come down further from 2009 for at least three years. These
measures will be coupled with greater transparency and communication to
customers about charges as they cross EU borders.
On the other hand, the benefits to businesses from having the Framework
consistently applied across Europe are likely to be felt in lower costs and greater
ease of installing and maintaining international networks. This may make it easier
for firms in the City to gain leverage from their other relative advantages, such as
the concentration of know-how, to compete more effectively in other centres.
Regulators can have a major influence by the way in which they allocate the
substantial blocks of re-cycled radio spectrum they have at their disposal.
Ofcom is broadly for the “leave it to market forces” approach, and as described
here, is pressing ahead with a programme of spectrum auctions that may pre-
empt a more co-ordinated approach emanating from the EU.
In general this is likely to favour the interests of City firms, who will in the main
consume the more profitable business data services, whereas a more
interventionist approach might see greater use of resources for applications that
51 http://ec.europa.eu/information_society/activities/roaming/index_en.htm
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support other public policy objectives such as universal service or public service
broadcasting.
Nevertheless, the danger in a less regulated approach is that the uses to which
the winners may put their parcels of spectrum may conflict in ways that are
unforeseen to them and that might be avoided by greater coordination.
75
respondents point out that if national jurisdictions allocate different parts of the
spectrum to different services, this could cause interference affecting the
capability of emergency services.
There was also plea for Ofcom to take a role in setting serviceability standards:
The important role of peering and co-operation in improving resilience has been
discussed in Chapter 3.
There is also some irritation that the congestion charge and parking fines did not
recognise the importance of access to premises to facilitate service delivery and
maintenance, although contractors displaying an HAUC board should be given
a vehicle dispensation from CoLC’s Highways Department and therefore not be
fines.
Recommendations
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• Co-ordinate a discussion of the implementation of the Traffic
Management Act between TfL and major ICT suppliers.
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Table 8: SWOT of EU and UK telecommunications regulation
Strengths Weaknesses
• Pro-competitive: presumption that • Inconsistency of application:
competition should be introduced foot-dragging and special
wherever possible and that interests have slowed progress in
competition is better than some countries and prices (e.g.
regulation. intra-European calling, mobile
• Objective: strict criteria, based on roaming charges) have
sound economic principles, for sometimes been slow to fall.
when regulatory remedies should • Speed of response: regulators
be applied. have typically been too slow to
• Consistent framework: same respond to specific anti-
overall rules apply throughout the competitive actions to prevent
EU, but with allowance for local harm being done – for this reason
conditions. blunter ex ante (preventative)
• UK at the leading edge: the UK measures are preferred.
has led and shaped the process • Limited success at introducing
of liberalisation in European competition into the local loop.
telecoms.
Opportunities Threats
• Wireless and mobile technologies • Increasing resort to litigation to try
offering increasing competition to overturn regulatory decisions –
with fixed for broadband and may make regulators cautious in
data services, as well as for voice future about offending powerful
services. interests.
• The “Digital Dividend” – large • Extra-territorial issues – threats
blocks of prime radio spectrum such as spam, abuses of data
made available by the ending of privacy, nuisance calls and
less-efficient older services. denial of service attacks are
increasingly international and
originate outside the EU.
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Chapter 6: The Longer Term View and Conclusions
Summary
This chapter looks at some of the longer term factors affecting the ICT
infrastructure in the City and City fringes. Changes in financial services globally,
in the ICT industry and the nature of telecoms supply need to be factored into
the plans of City and City fringe stakeholders. The uncertainties surrounding the
financial services industry are major, and there are also significant uncertainties
over the future capabilities of the UK ICT industry. It will be particularly important
to consider the future skills requirements of the ICT infrastructure industry in
supporting financial services across the City. Finally we present a summary of the
report’s conclusions and recommendations.
The credit and banking crises of 2008/9 raise questions about the shape of the
financial services and ICT supply industries in 10- years’ time.
Some of the issues shaping the financial services industry have been discussed in
Chapter 5 on regulation. The increasing power of European bodies to set
operational and reporting standards could have an implementation cost and
effect similar to that of Sarbanes Oxley, or could provide a springboard for a
major expansion in the City’s financial services community.
A set of scenarios from the World Economic Forum, produced before the current
crisis in financial services, compare possible models for the future of the industry.52
The determinants of the industry were thought to be technology and regulation,
with the likely scenario thought to be “Global Ivy League”. In this scenario,
global regulation results in less innovation, causing a concentration into a few
major global institutions. Regulation acts as a barrier to entry to financial markets
due to its complexity and cost.
What is clear is that, as the centre of gravity of the world shifts away from Europe
and North America, there could be fewer US and European based global firms
operating in London, and more from Dubai, Mumbai, Shanghai, Hong Kong and
Singapore. A question for the health of the City is its ability to provide a
competitive location for the European arms of these new participants.
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The implications for the City’s ICT infrastructure
The future of the digital communications industry future is more open to question.
The communications industry is faced with seismic changes in technology,
regulation and markets over the next decade. It is far from clear how it will
emerge beyond the current business cycle, but investment payback cycles in
this industry can be measured in decades and some big bets are being placed
by operators and their suppliers now.
Appendix 8 describes four very different scenarios for the digital communications
industry, post the Carter report and the explosion of available spectrum. They
explore the investment made and the resulting fragmentation or consolidation of
the supply industry.
One scenario suggests that there will be plenty of fibre for high quality networks,
but at higher prices, another that there will be confusion during the re-alignment
of suppliers, away from a connection mode basis of supply (for example mobiles,
fixed line) and towards end-to-end connectivity. A third suggests that national
fixed line operators (outside the City) retain SMP. A fourth sees no frills suppliers of
commodity services at lower prices.
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What effect could this have on the City and City fringes?
As with all scenarios, none of these will accurately predict the entire future: but it
is reasonable to suppose that high specification networks will become more
expensive, that commodity services will decline in price, and that there will be
market confusion during the re-alignment of suppliers.
Computer
Terminal
Fixed
Line Printer
Phone
Internet
Protocol
Scanner/ Mobile
Camera Phone
Television PC
While in Chapter 3 we reported that some respondents found that the City is an
easier place to recruit than other financial centres, the rise of other economies
and their financial centre flagged in Chapter 2, and the crucial role of the ICT
infrastructure going forward, means that the future ability of the City to recruit ICT
81
staff cannot be taken for granted. In addition, as the RAEng study brief suggests,
without a career path in the UK for skilled ICT staff to set the framework for their
operations, it could be difficult to attract the necessary calibre of staff to support
the ICT infrastructure. We suggest that this is an important rather than urgent
issue for investigation, for example in terms of identifying the skills profiles and
numbers of ICT infrastructure people needed to support the financial services
industry in the City in the future.
The Skills Sector Council for ICT skills in the UK, e-skills, could be a useful partner to
the CoLC in investigating the likely scenarios for the digital communications
industry and the implications for ICT industry skills to support the financial services
in the City. The study could be part of an ongoing 10- year ICT Infrastructure
Plan.
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Conclusions and recommendations
What should the CoLC do to ensure continued effective infrastructure support for
financial services in the City and City fringes?
The conclusion drawn, after discussion with our respondents, is that ICT
infrastructure in the City is “a given” and that the City is comparable to New York
in ease of use, price and capability of ICT infrastructure (Chapter 3).
Additionally, most large City organisations have global stature and the
knowledge and staff to make best use of the ICT infrastructure.
Our interviews and desk research have highlighted that we need to consider five
aspects of the ICT infrastructure in relationship to the City’s future
competitiveness, over and above the factors measured by existing
competitiveness ICT comparisons. These are:
• Worldwide and high specification (fibre) network connectivity and mobile
broadband;
• Data centre capacity and utilisation;
• Electrical power supplies;
• Security and resilience, covering both physical security and response to
electronic attack;
• Skills in the ICT industry.
The City currently sponsors the “City of London Security and Contingency
Planning Group, with responsibility across the Square Mile, Docklands and
Canary Wharf. We recommend that a group similar to this be set up to plan and
monitor the five aspects of ICT infrastructure as above, in so far as they affect the
City’s competitiveness, in the form of a 10- year Plan (Chapter 2). The reasons for
this recommendation are articulated in the following sections.
Network connectivity
We find evidence, from the number of worldwide network operators, and
suppliers of fibre “in the ground”, that the City is a competitive market for ICT
infrastructure, (Chapter 3), re-enforcing the Ofcom findings for mobile suppliers
(Chapter 5).
83
trends and the need for security and resilience. Availability of connections is not
expected to be an issue over the medium term but the expansion of electronic
trading would test the infrastructure capability first.
We recommend that the CoLC should monitor the number of worldwide network
operators in London compared with other cities, and mobile broadband
deployment in the City, as well as the number of suppliers of fibre “in the ground”
within the context of a 10- year Plan, (Chapter 3).
Data Centres
A number of factors are driving a trend towards specialist data centre space.
The need for high speed connections, continuous power supplies, Green
legislation and business continuity is matched with high costs of office space to
drive the need for data centres with specialist provision and cheap locations.
We recommend that the CoLC should track the total and available data centre
space available to the City (for example, within a 30- mile radius) for three
reasons. First, data centre space is a measure of competitiveness. Second, data
centre operators are internationally focused and can give early warning of
factors threatening competitiveness. Third, this would ensure their inclusion in
business continuity exercises. This would be an additional element of the 10- year
Plan (Chapter 4).
The demand for data centre space – both in-house and for shared services – is
expected to continue to grow over the next decade. Data centres for financial
services are ideally sited within 30 miles of the City, for a number of reasons.
Further, data centres are easier to build and supply with telecoms and computer
and other equipment, than to service with power. A data centre uses as much
power as a small town. The planning cycle for power is longer than the build
time for a data centre, which causes friction with the regulatory system.
Power supply for data centres is the major issue highlighted by this study.
Power
Power supplies for data centres and to a lesser extent for office space are
highlighted by our respondents as a current and future problem. There appear
to be two different areas of concern.
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It is the view of many of our respondents that electrical power supply costs and
perceived lack of ability to meet future demand are constraining the
competitiveness of the City's financial services. Both government and regulators
should stay abreast of this situation. It is recognised that this is a UK problem
rather than specific to the City (Chapter 4).
Secondly, within the GLA area there are pressures on planning from
environmental (Green ICT) concerns which make it very difficult to site a new
data centre in the area. Additionally, power supplies in the M25 are constrained,
with some large organisations choosing to site data centres in the North of
England, Paris or Frankfurt, rather than London.
A 10- year Plan co-ordinated by the CoLC would enable the electrical power
supply company, EDF Energy Networks, to make a better-founded case for new
investment to the regulator. We recommend that the CoLC should use a 10-
year plan to inform this discussion, (Chapter4).
We have also considered the role of standards for service level agreements in
increasing peering and hence resilience.
The New York IT Plan has highlighted the importance of a highly secure, resilient,
mobile network for use by the emergency services. In the UK, the Airwave system
supports the emergency services with mobile communications. It has been
tested, for instance on 7/7.
There were some concerns expressed by our respondents that the Airwave
system for “blue light” services could be inadequate in case of severe
emergency. A commercial mobile system with high security and resilience,
available also to the emergency services would, it is thought, be an important
asset to London’s security and resilience. We recommend that, as part of a 10-
year Plan, the CoLC examine the case for commissioning or supporting such a
system (Chapter 3).
85
the CoLC should review the skills profiles and numbers required, and continue to
track these as part of a 10- year plan (Chapter 6).
SMES
We surveyed SMEs in the City and City fringes. Some of these were the UK arms
of international companies, and so have international sources and comparators.
These SMEs find the City an easier place to do business than a number of
competitor locations, and use approaches pioneered in offices elsewhere (for
example, the US or Far East) to tackle matters such as security and resilience.
While the SMEs surveyed are found to often not have ICT plans, or SLAs, they are
very attuned to their customers’ demands. They use third party data centres for
applications processing and back up, which require high specification networks,
Some serviced offices make it difficult to install high specification (fibre) networks.
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Appendix 1: List of Interviewees
Job title Organisation Business
IT Manager Acrobot Company Ltd Software and design
engineering
Business Development Art of Computing IT support
Manager
CTO Arthur J Gallagher Insurance
CIO Arthur J Gallagher Insurance
Director Balatro Ltd FS IT Consultant
Director of BERR Government
Communications Networks
Director Bizextra Enterprise Agency
Regional Manager BT Infrastructure
Senior Marketing Manager, BT Global Services Infrastructure
FS
Public Policy Manager, BT Openreach Infrastructure
Senior Director CB Richard Ellis Property Advisors
Director Challenge Forum Think Tank
ICT Director (new) Charles Stanley Stockbrokers
ICT Director (outgoing) Charles Stanley Stockbrokers
Infrastructure Project Chi-X Europe Services
Manager
Business Continuity Citigroup Banking
Management
Business Continuity Citigroup Banking
Management
IS Infrastructure Manager City of London Local Government
Corporation
IS Director City of London Local Government
Corporation
Anon City of London Police Local Government
Development manager Codefarm Credit Derivatives
Technology
Paper submission COLT Infrastructure
MD Europe Decision Strategies Consultants
International
Chief Technical Officer Denver Technology ICT
Principal, CS Technology Deutsche Bank Banking
Planning Manager, South EDF Energy Networks Infrastructure
Chairman Financial Services Club Club of FS organisations
Policy Advisor FSA Regulator
Director Hinton and Co Work relationship
advisors
Group IT Director Hiscox Insurance
87
Head of IT Operations HSBC Banking
Premier End User Support HSBC Banking
Manager
Finance Director Immune Targeting Biotech
Systems Ltd
Director, e-commerce IoD e-commerce
Head of ICT LB Greenwich Local Govt
Manager ICT service Dept LB Tower Hamlets Local Govt
IT Production Director LCH Clearnet Infrastructure
Director, EU Infrastructure Level 3 IP Transit
Projects
Executive/life coach M D Training Group Training
Group IT Director Marks and Clerk Patent Attorneys
Global Head IT Risk Morgan Stanley Investment
MD, Technology Morgan Stanley Investment
Director Netstrategics Ltd Telecomms consultants
IT Systems Manager Norman Disney and Consultant engineers
Young
Director Technical Strategy NTL (Virgin Media) Infrastructure
Virgin Media
Partner OCP Change Consultants
Policy Advisor Ofcom Regulator
IT Telecom Mgr UK Regus Serviced Offices
Director SAMI Consulting Consultants
Executive SAMI Consulting Consultants
IT Manager Simon and Schuster Publishers
Director Simulations/ Hall Training /Software
Associates
Director Steelhenge Business Continuity
Director Strategic Intelligence Telecomms Consultants
Consulting Services
Marketing Manager Sungard Infrastructure
MIS Systems & Application SWIFT Secure Financial
Management & Support Messaging Services
Specialist,
Head of Content, ThomsonReuters Information services
Technology & Operations
IT Dept Ttsp Architecture
Chief Technology Officer Turquoise Equities Trading Platform
Director of Strategy Vocalink Infrastructure
Head of Core Engineering Vodafone Infrastructure
Managing Director Wilshire Analytics Fund Management
Analytics
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Appendix 2: Questions Asked
Current Position
Telecoms Infrastructure
1.01 What broadband fixed wire services do you use e.g. Leased line DSL, Local
Ethernet Service, dedicated fibre? If using Leased line old style services what
upgrade challenges do you face?
1.02 Do you source broadband services from more than one supplier and is this
for resilience or other reasons?
1.03 What wireless services do you use and do you see any need for Wi-Max as
well as 3G?
1.04 Do you source wireless services from more than one supplier and is this for
resilience or other reasons?
1.05 Do you believe that the fixed wire voice and data services you buy provide
a good, acceptable or poor level of reliability?
1.06 Do your suppliers meet your expectations of timeliness and quality of initial
and ongoing service delivery?
1.07 Do you have formal service level agreements with your suppliers and do you
track and enforce them?
1.08 Do you believe that you have access to a tariff regime that provides value
for money in a variety of contexts and applications?
1.09 What assumptions do you make about the physical and logical security of
the network services you use? Are suppliers willing to enter into contractual
commitments on this?
User questions
3.01 Do you have a medium to long term strategic plan for ICT infrastructure?
3.02 To what extent is this driven a) by the need to maintain cost effectiveness in
the infrastructure and b) by innovation and competition in business practices?
89
3.03 If it’s documented would you be willing to share it under the “Chatham
House” rule?
3.04 Do you work with suppliers on technology innovation, risk management and
capacity planning, if not why not?
3.05 How does mobile working figure in your planning horizon?
3.06 Do you find any difficulties with reliability and/or security of international
connectivity for mobile workers?
3.07 Do you expect to see increased flexible or home working and is this part of a
“Green IT “ Agenda or is it driven by your organisation’s accommodation
strategy?
3.08 Do you see benefits in convergence of all services onto IP network
infrastructure and does this figure in your plans?
3.09 Do you see any significant reliability or resilience risks from the move to all
telecoms services being delivered over IP and/or
3.10 Do you see any significant reliability or resilience risks from the increasing
reliance on radio mobile technologies?
3.11 Do you see roles for social networking tools and other web 2.0 tools such as
Wiki in your business and what do think the capacity impact would be on servers,
storage and network and what threats to security would give cause for
concern?
3.12 Are the unit costs of infrastructure services increasing or falling? To what
extent are price changes influencing your own planning?
3.13 What are the biggest barriers to exploiting speed of available infrastructure?
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5.04 Have you had any significant difficulties meeting customer demand and if
so was there a specific constraint such as third party service provision, planning
delay or lead times?
5.05 Does the City Corporation facilitate provision of services as well as it could, if
not why not?
5.06 How do see the impact of the “Green IT” Agenda?
Regulation
Case Studies
10.01 Do you have the material for a short case study?
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Appendix 3: Data Sources
Countries: Background
This is the fifth report in the series, and focuses on trends and developments in the
UK’s communications market, with the aim of providing a context for decision-
making by Ofcom, as well as by commercial and public service organisations.
Key points in this year’s report include an examination of convergence based on
content, distribution and consumption. The first next-generation broadband
networks are beginning to emerge, offering a step-change in the speeds
available as the UK moves towards a super-fast broadband network. In the first
half of 2008, mobile broadband began to take off, representing a potential
alternative to fixed-line broadband as users plugged in USB dongles to their
laptops to access the internet via high-speed mobile networks.
Websites
http://www.ida.gov.sg/About_Us/20070903145526.aspx
Cities: Background
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“London: Winning in a Changing World - Review of the Competitiveness of
London’s Financial Centre”, (The Wigley Report), January, 2009
http://www.london.gov.uk/mayor/economy/london-winning.jsp
“Global Financial Centres Index (GFCI) 3 – Review”, in City Research Focus, City
of London, No. 2, April, 2008, pp. 1-2.
“Defying augury: can the stock exchange and the City see off the
competition?” The Economist, 6th September, 2008, pp. 36-7
Sassen, Saskia, “Global Practice in Local Scenarios”, Lecture at RIBA, 15th May,
2008 (Audio available on internet).
(http://www.buildingfutures.org.uk/projects/building-futures/futures-fair-
08/futures-dialogues-global-practice-in-local-scenarios)
93
London Fringe
Websites
www.telehouse.net
www.interxion.com
www.level3.com
www.equinix.com
Regulation
This is the third report in the series taking into account data up to the end of 2007.
Key points in this report include the acknowledgement that putting the UK
market into an international context is becoming increasingly important, as
communications service provision globalises and as technological innovation
breaks down traditional national market boundaries. Mobile broadband
availability using HSDPA technology now exceeded 70% in many European
countries, and was highest in the UK at 87%. The highest growth in telecoms
service revenues was in the UK and Canada, up by 5%, driven mainly by
increased use and broadband take-up. Japan was far ahead of the rest of the
94
countries considered in the report in offering next-generation access broadband
networks, with fibre to the building available to 85% of the population by the end
of 2007. By contrast, the UK was lagging behind even other countries of Europe
with less than 1%.
Websites
http://www.ofcom.org.uk/about/sdrp/
http://ec.europa.eu/information_society/doc/factsheets/tr9-listofmarkets.pdf
http://www.ectaportal.com/en/basics651.html
http://www.samknows.com/broadband/mapping/mapping.php
http://www.ofcom.org.uk/consult/condocs/nga_future_broadband/
http://www.berr.gov.uk/files/file47788.pdf
http://www.computerweekly.com/Articles/2009/01/26/234457/the-carter-review-
digital-britain.htm
http://www.ofcom.org.uk/consult/condocs/bcmr_tisbo
http://www.ofcom.org.uk/radiocomms/spectrumawards/
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/708&type
=HTML&aged=0&language=EN&guiLanguage=en
http://ec.europa.eu/information_society/activities/roaming/index_en.htm
Resilience
“The Financial System and major operational disruption: work done by the
Financial Authorities to promote the resilience of the Financial Sector.” HM
Treasury, June, 2003 (Unclassified)
http://www.hm-treasury.gov.uk/d/FSMODbkgd.pdf
This website has been established by the UK’s Tripartite Authorities (HM Treasury,
the Bank of England and the Financial Services Authority) to provide a central
point of information about work on continuity planning that is relevant to the UK’s
financial sector.
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“Resilience Benchmarking Project”, (Discussion Paper), The Tripartite Authorities,
June, 2008.
MILLER, Ron, “Standards are the name of the game”, SunGard Availability
Services, 2008
“From Adversity to Availability: A Practical Insight into Business Risk, Continuity &
Information Availability”, SunGard Availability Services
http://www.a2areport.co.uk/Download.aspx?Uid=796&Sc=192117
Blakely, Rhys et al, “MI5 alert on China’s cyberspace spy threat”, The Times, 1st
December, 2007
Websites
http://www.londonprepared.gov.uk/businesscontinuity/
http://www.pitcom.org.uk/briefings/PitComms1-CNI.pdf
www.cpni.gov.uk
Green IT
Website
www.london.gov.uk/gla/tenders/docs/environmental_policy.pdf
General
“Telecoms (The coming wireless revolution)”, The Economist, 28th May, 2008
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Other
“Measuring the impacts of ICT using official statistics”, Working Party on Indicators
for the Information Society, Committee for Information, Computer and
Communications Policy, Directorate for Science, Technology and Industry,
OECD, January, 2008. (DSTI/ICCP/IIS (2007)1/FINAL Unclassified)
Website
http://www.weforum.org/financialarchitecture
en.wiikipedia.org/wiki/Microcredit
http://www.raeng.org.uk/policy/ict/ict.htm
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Appendix 4: Glossary
1G First Generation Cellular Mobile Wireless The first generation of cellular
wireless was based on analogue technology. The systems were designed only to
carry voice services.
ADSL Asymmetrical Digital Subscriber Line A digital technology that allows the
use of a standard telephone line to provide high speed data communications,
Allows higher speeds in one direction (towards the customer) than the other.
ATM Automated Teller Machine “Hole in the wall” for dispensing cash.
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CELA Central and East London Area An area Ofcom has defined as being
“competitive” for high-speed data services.
Digital dividend The spectrum that will be released by the switch to all digit
television.
Fibre Optical fibre, used eg for high connectivity between data centres or
where fast response is required. Modern-day optical fibers can carry information
at around 14 Terabits per second over 160 kilometres of fibre.
GHz Gigahertz.
GSM Global Standard for Mobile Telephony, the standard in use for 2G mobile
systems.
99
Headline connection speed The theoretical maximum data speed that can be
achieved by a given broadband. A number of factors, such as the quality and
length of the physical line from the exchange to the customer, mean that a
given customer may not experience this headline speed in practice.
IP (Internet Protocol) The packet data protocol used for the routing and
carriage of messages across the Internet and similar networks.
ISP Internet Service Provider A company that provides access to the internet.
LLU (Local Loop Unbundling) LLU is the process whereby incumbent operators (in
the UK this means BT and Kingston Communications) make their local network
(the lines that run from customer’s premises to the telephone exchange)
available to other communications providers. The process requires the
competitor to deploy its own equipment in the incumbent’s local exchange and
to establish a backhaul connection between this equipment and its core
network.
Local Loop The access network connection between the customer’s premises
and the local PSTN exchange, usually a loop comprised of two wires.
MHz Megahertz.
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NRA National Regulatory Authority (Ofcom in the UK).
POP Server “Post Office Protocol” Server. An internet standard protocol that
allows you to receive e-mail from an Internet Service Provider.
SME Small / Medium Sized Enterprise. A company with fewer than 250
employees.
Termination rates The charges one mobile operator makes to another for the
final delivery of a call to a handset on its network.
VMWare Virtualisation Software. The expression is derived from the terms “virtual
machine” and “software”. VMWare allows one computer’s operating systems
and applications to be run in another Set of hardware
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VoIP Voice over Internet Protocol. A technology that allows users to send calls
using Internet Protocol, using either the public internet or private IP networks.
WiFi hotspot A public location with access to the internet using WiFi technology.
Wireless LAN or WiFi (Wireless Fidelity) Short range wireless technologies using
any type of 802.11 standard. These technologies allow an over-the-air
connection between a wireless client and a base station, or between two
wireless clients.
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Appendix 5: ICT Indices
Introduction
The City of London publication, “The Global Financial Centres Index 5”, March,
2009, ranks London as the world’s leading financial centre. It has a sub-index for
infrastructure which also ranks London in pole position, but this includes
information on property and amenities as well as telecoms data.
The starting point for further research was the quest for other comparator indices
which might throw a more detailed light on ICT elements as they relate to
financial centres.
Comparison surveys in the ICT sector which have been identified are mainly at
the country level, and are, therefore, of limited use in comparing cities within
countries, let alone the financial centres within those cities.
It should also be pointed out that most of the variables included go well beyond
infrastructure technology, and even the technology itself, covering such broad
headings as:
- Economic and Institutional Regime
- Education and Human Resources
- Innovation System
- Market Environment
- Political and Regulatory Environment
- Business Environment
- Social and Cultural Environment
- Legal Environment
The WEF / Insead report alone covers 68 variables, many of them nothing to do
with technology. The Economist Intelligence Unit report covers “nearly 100
separate quantitative and qualitative criteria” which are not divulged, but the six
primary categories into which they are organised tell the same story.
Full details of the surveys are given in the references at the end of this appendix,
and in the report bibliography. All are available on-line.
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Thirteen tables have been extracted from the three country surveys and
reduced to cover just the countries whose cities are considered in this study.
These are shown in composite form in Table 2 (Chapter 2). The tables represent
the overall indices for each of the surveys, together with those variables which
are closely related to ICT and its infrastructure. They will now be considered in
turn.
Two World Bank KAM indices are listed: the Knowledge Economy (KE) Index
based on a country’s Economic and Institutional Regime, Education and Human
Resources, Innovation System and Information and Communications Technology
(ICT). Also listed is an individual ICT index. Variables are normalised on a scale of
0-10 relative to other countries in the comparison group. The UK comes 5th and
6th respectively against the other selected countries, but all the leading countries
are fairly close together. However, a small number of fairly general variables are
used in both cases.
Of more interest are the World Economic Forum / Insead indices. The overall
Networked Readiness Index is built up from twelve component indices including
an Infrastructure Environment Index and sixty-eight sub-indices, for which
variables are scored on a scale of 1-7. These two indices, together with six
relevant sub-indices are listed.
The UK comes 5th and 3rd respectively in the Networked Readiness and
Infrastructure Environment Indices against the other selected countries.
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On the first two and the fourth, the UK comes 4th, 5th and 3rd in the control group
respectively, the leading scores being very close together. On the third, the sub-
index for secure internet servers per 1m of the population, the UK again comes
3rd, only the United States being substantially ahead.
Of more concern, however, are the last two indices. Regarding Government
Prioritisation of ICT, the UK comes only 7th in the control group, and 21st out of all
the countries covered in the publication. In addition, on the importance of ICT to
government vision of the future, the UK only reaches 10th place in the control
group and 42nd out of countries overall. On top of this, in both indices, Singapore
and the United Arab Emirates come 1st and 2nd in the control group. In
mitigation, although the report and indices were only published in 2008, it would
appear that some of the data used is at least two-three years old.
The more recent EIU e-readiness rankings (variables scored 0-10) give the UK joint
4th place in their category for Government Policy and Vision, and 6th in overall
ranking in the control group, although the UK is behind Singapore in both
rankings. The United Arab Emirates comes 10th in the control group on
Government Policy and Vision with a comparatively low score of 6.45 as
opposed to Singapore (9.25) and the UK (9). The UK comes 5th in the sub-index
for Connectivity against the other selected countries
The EIU have in their most recent analysis changed the factors the affect the
connectivity scoring, removing narrowband telephone penetration and adding
broadband and mobile phone penetration. They also use broadband
affordability – the ratio of a subscription to median household income.
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These factors are mostly consumer and citizen oriented, rather than focused
directly on business services, though Internet security is clearly relevant to B2B as
well as B2C financial services.
Commentary
Only the most general conclusion can be drawn from these tables. Even within
the indices given, countries’ rankings vary quite widely. When countries which
have a global financial centre are compared, the UK is in the leading group in
terms of information and communications technology.
There are also two city based indexes, the City of London’s own Global Financial
Centres Index (GFCI), and the Mastercard Worldwide Centers of Commerce
(WCOC) Index, which considers the wider aspects of the future of cities. A
financial centre will be affected by the hinterland of the rest of the city.
Note that GFCI 4 was described in Chapter 2 but that GFCI 5 results have since
been published. Both GFCI 4 and GFCI 5 rank London first overall and on
infrastructure.
Professor Saskia Sassen* was one of the panellists who overviewed this recent
large-scale study of major and minor global economic centres.
“This global economy values and can extract value from the specialised
differences of cities. …. A lot of these state of the art built environments
can be thought of as inhabited infrastructures …. When you say
infrastructure, you are alluding to a mix of something which is necessary
and indeterminate.” (1)
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In another recent article, she added that firms that operate in dozens of different
countries have to handle the different accounting, legal, financial, insurance
and other systems, as well as the management and investment cultures of each
country. She continued:
“…. This…. also explains why the many and very diverse global cities
around the world don’t just compete with each other but also collectively
form a globally networked platform for the operation of firms and
markets.” (2)
Key Points
Surveys comparing the development of ICT in countries show that when
countries which have a global financial centre are compared, the UK is in the
leading group.
In the economy of the future, cities will collectively form a globally networked
platform where their historical and specialised economic differences will
increasingly matter and add value.
Sources
107
Surveys
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Appendix 6: Worldwide Network Operators
Table 3 in Chapter 3 is a table of twenty of the world’s biggest network operators
and telecommunications companies by country of origin, and the cities of the
world of relevance to this report where they have a presence. The “telcos” listed
all originate in countries which have global financial centres of interest to this
report.
Some qualification should be made about the table. Some major companies,
such as Sprint Nextel (USA), or Virgin Media (UK), operate primarily or wholly in
their country of origin and are excluded. Others such as Vodafone do not
necessarily locate their operating centres in major cities and may operate widely
through joint ventures and associated undertakings. Royal KPN has many
international and regional partners. An ‘x’ in brackets indicates a less major
presence such as a representative or customer support office. Every effort has
been made to ensure the table’s accuracy, but specific current information on
individual companies is not always readily available.
PCCW Global (UK) Ltd., the UK arm of the Hong Kong company, obtained its
Telecommunications Operator Licence in 2001 and provides a number of
services including virtual private networks. It regards London as an ideal location
for its regional office in Europe, and Asia, particularly China, as the biggest
potential market for European companies. With its own presence in Asia, and its
longstanding relationships with Asian carriers, it is able to provide its European
clients with one-stop shop solutions.
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- Geo
- Global Crossing
- Interroute
- Level 3
- Neos Networks
- Thus
- Verizon
- Virgin Media
Sources:
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Appendix 7: the Singapore iN2015 Plan54
Vision
Innovation
iN2015 will fuel creativity and innovation among businesses and individuals by
providing an infocomm platform that supports enterprise and talent.
Integration
iN2015 will connect businesses, individuals and communities, giving them the
ability to harness resources and capabilities - speedily and efficiently - across
diverse businesses and geographies.
Internationalisation
iN2015 will be the conduit for providing easy and immediate access to the
world’s resources as well as for exporting Singapore’s ideas, products, services,
companies and talent into the global markets.
Goals
and
Strategies
54 .www.ida.gov.sg/About%20us/20070903145526.aspx
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- To spearhead the transformation of key economic sectors, government
and society through more sophisticated and innovative use of infocomm;
- To establish an ultra-high speed, pervasive, intelligent and trusted
infocomm infrastructure;
- To develop a globally competitive infocomm industry;
- To develop an infocomm-savvy workforce and globally competitive
infocomm manpower.
Opportunities
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Appendix 8: Scenarios for digital communications
The communications industry is faced with some seismic changes in technology,
regulation and markets over the next decade. It is far from clear how it will
emerge beyond the current business cycle, but investment payback cycles in
this industry can be measured in decades and some big bets are being placed
by operators and their suppliers now.
Fragmentation Consolidation
come boats
Large online service providers such as Google and Microsoft continue to prosper
alongside a host of newer providers exploiting the opportunities of new internet-
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connected mobile devices, pervasive computing and entertainment content
financed by novel business models.
Implications for the City: plenty of fibre but at higher prices
Although the fight against spam and malicious actions against networks
intensifies, international collaboration and ample resources ensure that this issue
remains manageable.
Implications for the City: confusion during re-alignment of suppliers
Traffic volumes for fixed and mobile operators accelerate, but price competition
and regulated returns on fibre access networks keep revenues and margins flat.
The pre-recession trend towards global consolidation resumes at a slower pace,
but it is the new tigers of the developing world which expand into the mature
markets of Europe, North America and Japan, using their low-cost, no-frills
business models to compete on price, as their home markets saturate.
Implications for the City: no frills suppliers at lower prices
Price optimization
The threat of business failures drives faster international consolidation. The EU
regulator imposes a pattern of strict structural separation and unbundling, but
with protection and utility returns for deep-pocketed long-term operators and
this becomes the international norm.
Mobile internet applications evolve towards a limited core set based around
communications, commerce and social networking, but privacy and information
security considerations hamper growth. Consumers opt for value, features and
durability of handsets over networked features. High-speed broadband access is
widely available, but its take-up was limited by the decline in popularity of
broadcast video entertainment as production and marketing budgets declined.
Implications for the City: national fixed line operators retain SMP.
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